Your thoughts on Acadian Timber's recent earnings? I have owned it for quite a while and although I like the healthy dividend I noticed the payout ratio in the quarterly report was 115%. Should I be worried about that?
Thanks
Stuart
EPS of $0.37 beat estimates of $0.1867 and revenues of $26.59M missed estimates of $28.33M. ADN generated $4.3M of free cash flow, and sales grew by 13% primarily due to improved contractor availability. Management remains confident in the stability of the northeastern forestry sector and expects steady demand, though inflationary pressures are expected to impact financial results through elevated contractor rates and fuel surcharges. Its Adjusted EBITDA margin contracted slightly and its payout ratio remains above 100%, although it has declined from last year. Largely, the stable demand seen in the first three quarters is expected to continue throughout 2023, however, pricing for hardwood sawtimber may continue to weaken. It generated good free cash flow, and overall we would consider these decent results. The stock is seeing some support at these levels.
Its payout ratio is high, but it has been declining, and if needed, the company can use some of its cash or additional debt to continue its dividend payments. Its interest expenses are not overly burdensome on its earnings, and we feel that at a 7.1% yield and price to book of less than 1X, it is at a good value today.