According to the last CODI 10q, CODI paid out 33.9MM in distributions through the 1st 9mo of 2009. So CODI are not paying out 2x distributable cash.
Fair enough, the assertion is false, but there is still cause for concern. CODI paid out 1.77x the distributable cash they earned in 09. Cause for concern is ameliorated by two things:
1.) They cover the difference with proceeds from the sale of two businesses at what were very close to peak multiples.
2.) !!3q09 distributions were 94% covered by cash available for distribution!! And some of CODI's platform businesses are seasonally very weak during that quarter.
CODI business performance improved rapidly in the middle part of 2009. Based on results of peers, results are likely to continue improving through the fourth and first quarters. Especially results from Staffmark.
I expect you'll see the distribution fully covered by CAD again during the 4q. 1q is seasonally weak again. Then CODI will announce an acquisition...then there might be room for distribution growth.
So I have no problem with the article in a general sense. It's great to have a diversity of opinion! However, some of the facts aren't quite correct...and most of the concerns expressed are expressed using a rear-view-mirror point of view.
As Brennus notes, the article speaks of paying dividends (actually distributions) from capital, when in fact, CODI has $110m of cap gains from which to pay distributions, enough for 2.5 years of distributions just from cap gains.
And I agree. My guess is CAD will cover distributions for Q4. And although Q1 is historically weak, it is not going to take much incremental improvement in the labor market for Staffmark to add significantly to that bottom line.
I also saw that Zacks moved CODI to a "strong sell." Ho hum ...
As to the timing of that elusive acquisition, I'm tired of guessing and being proven wrong. Heck, I couldn't even get the day of Q4's distribution announcement correct!