Alaris Equity Partners Income 6 25 Senior Unsecured Debentures T.AD.DB.A

Redemptions/conference call and payout ratio

[mickeymouse]

If you listen to the conference call there are several comments related to the "redemptions" and the possible implications.  From the fourth quarter results it does mention that KImco and Federal Resources are evaluating possible moves but nothing is "IMMINENT".  This is also mentioned in the conference call comments and Alaris management is actively supporting the Kimco redemption as it would result in $20 million in deferred distirbutions coming to Alaris that they would have to wait years to collect without redemption.  A KImco redemption is viewed by management as a positive.

The Federal Resources redemption for $86 million is a slightly different story - FR has quadrupled their business over the last few years and has a very strong ECR so it is a stable and lucrative postion for Alaris.  The one positive is that this will provide cash to reinvest - from the last three months it is very apparent that there are numerous possible deals in the pipeline for Alaris and they confirmed this in the conference call comments.

The dividend was left at .31 for this quarter and sounds like it will stay there for the next quarter - the impetus for a dividend increase will be the restoration of full distirubutions from PFGP.  A comment was made that at the time of the call their membership numbers were improving week to week as more states reopen from the pandemic - the expectation is that full distributions will resume in July.

The current yield is close to 8% and their payout ratio is slightly over 68% - if full distributions from PFGP resume in July the payout ratio will drop even lower and they may revisit their distributon for Q3 - there at least two analysts predicting an increase in distributions later this year.

The common equity postions (versus the prefs only approach used in the past) Alaris is now taking in some of these companies has started to pay off and it has opened up many more deal possibilities which is definitely a positive development going forward.

The management commented on their frustration with the volatile trading price of their stock and they seem to be questioning whether the market share price will reflect a higher dividend - so the 70-80% target payout ratio they have mentioned in numerous previous calls may be changing.