Thanks!
Paul K
It can be difficult to utilize payout ratios for such a fund, as it owns a collection of assets and is not an operating company. Looking at operating cash flow, it had $2.6M in cash flow in the Q1 but paid out $11.3M as distributions. Thus, the payout ratio on that is ridiculously high. But it could sell assets to raise money, if needed. It has been losing money, and a portfolio writedown would not surprise us much. Investors are expecting a cut, considering the outlying yield now (14% indicated). We would give 50/50 odds of a cut. The managers might wait a bit to see if interest rates do indeed peak before making any decision (rates rose yesterday in Canada). After a 50% cut sustainability will improve, but we would still like to see better earnings and particularly cash flow. Even at 50% the payout ratio is close to 200% based on Q1 results.