RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Parameters to assess Alaris...(add or eliminate )I looked at AD's numbers for the past four quarters.
(1) On an earnings basis, the approximate TTM payout ratio using a short-cut formula is 261%. So 270% is not unrealistic. I'm satisfied now that I know where Morningstar got its number: the earnings-based payout ratio, PR=[Div/E]. The weakness of this formula is that a single large non-cash item can render it nonsensical.
(2) Dropping 2017Q3 with the SM impairment, the earnings-based payout ratio is about 99.6% (short-cut used again).
(3) AD reports their payout ratio based on "net cash from operations", PR=[Div/NCFO], so a cash-and-equiv-items-only approach. Short-cut formula again, TTM is about 71% and dropping 2017Q3 it's about 72%.
The impairment of SM is a non-cash item and doesn't affect AD's ability to pay the dividend. So, as mentioned below, you have just seen an example of Morningstar applying a robotic formula to a situation where it isn't very meaningful.
.
TickerTwit wrote: I've found that some of Morningstar's material isn't 'analysis', it's just formulaic response, not necessarily appropriate for the sector in question.
In this case, it might be that they calculated payout ratio on an earnings basis rather than on a distributable-cash basis. The result can be dramatically different. I haven't gotten to AD's recent numbers yet, just throwing in this possibility in case it explains the 270%.
.
maypeters wrote: I would recommend to stop using Morningstar for Canadian stocks and start using SEDAR to go through the financials.
The payout ratio is below 100% even with existing cash flow. New investments and the resets starting Jan 1, 2018 of course help. Once the deal is done the cash flow starts right away and does not take time. It may take time to complete the due diligence and win the deals but once the deal is completed - cash flow starts.
At no point of time has the payout ratio been at 270% and if you believe that it was at 270% for 2017 then you should rethink your analysis or the source you are using (Morningstar in this case).
# I am beginning to wonder if most of the sellers are depending on wrong info like 270% payout for 2017 etc. Anyways it gives me an oppotunity to add so am not mad about it.