The company is organized as a MLP, not a regular corporation. It is REQUIRED to pass on its earnings to the partners. Therefore the payout ratio is not a valid way to rate it. When it grows its business by making new acquisitions, it must either issue more shares or borrow money. Often they issue more shares and use part of the proceeds to pay off previous borrowings and 'other' expenses. The 'dividends' are not regular dividends and some of the payments may be return of capital and not taxed now, but when you sell your basis is lowered and your capital gain is more. You get an annual K1 statement which gives you the figures and tax info. I hope this is helpful.
1. CODI is not an MLP and has nothing in common with MLPs excepting that CODI (organized as a Delaware trust) has elected to be taxed as a partnership, therefore you will receive a K-1 each year. "Compass Diversified Holdings, a Delaware statutory trust (“Holdings”), was organized in Delaware on November 18, 2005." (From the most recent 10-Q.) "Accordingly, our shareholders are treated as beneficial owners of Trust Interests in the Company and, as such, are subject to tax under partnership income tax provisions." (From the most recent 10-K.)
2. Although CODI may be technically required to pass on "earnings" to shareholders via K-1s, it has no obligation to make distributions to shareholders, and distributions are paid solely at the discretion of the Board.
3. The quarterly payments by CODI to shareholders are distributions, not dividends. With the annual K-1, each shareholder is allocated his/her/its share of interest earned, qualified dividends, capital gains, income, losses, deprecation or other income/losses.
4. Through a relatively complex tax calculation (which I will not go into), distributions reduce a shareholder's basis because they are generally treated as a return of capital. However, the distributions are not necessarily all taxed as capital gains on sale because upon sale, the difference between the reduced basis and the original cost basis, may be taxed as recaptured income(depending upon the allocation of the K-1s during ownership). ("Ain't no such thing as a free lunch." Milton Friedman, the economist, not Richard Nixon's speech writer.)
5. Generally, the difference between the initial purchase price of shares, and the selling price of the shares, will be treated as a capital gain/loss.