Since late July Acadian has been in a steady downtrend that seems inconsistent with both the price trend for lumber and the latest Trump tariffs. I am trying to understand what is driving this downtrend, as some of their production (Maine) would not be subject to a tariff and lumber prices seem not to have "added" the tariff but absorbed it.
I own it as an income stock in a LIF. Aside from the drivers of the stock in the short term I am interested in dividend risk; is it or should it be a concern? Lastly, given the decline in price is there a trigger price you would be comfortable with to buy? I am considering adding at current yields.
Thanks as always,
Dave
While tariffs have been largely absorbed, they do have an impact on earnings. Analysts (two) project a decline in EPS next year. Also, we note forecasted earnings are less than earnings of eight years ago: there is not much long term growth here. The small size of the company adds some risk, and the stock decline going into year end could set up some tax loss pressure. Obligations are $110M, and 12-month cash flow was only $7M. We think financial risk is fairly high, without a rebound in product prices or demand. The dividend payout ratio as reported at June 30 was 274%. We think everyone would agree that puts the dividend at some risk. We would be cautious here, and certainly would not want to add. It is hard to predict a buy price as a dividend cut might see a big sell of. We think if the yield approaches 10% then a cut would likely be priced in around that price level.