CSE.PR.A Dives on Common Dividend Warning

Capstone Infrastructure Corporation has announced that it:

updated its outlook for 2012 for Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) and payout ratio, which is based on Adjusted Funds From Operations (“AFFO”), to reflect the impact of certain external events and internal initiatives subsequent to the Corporation’s previous outlook.

The Corporation currently expects 2012 Adjusted EBITDA to be approximately $120 million compared with previous estimates of approximately $140 million. The 2012 payout ratio is expected to be approximately 120% to 130% compared with the previously provided outlook of approximately 85% to 90%

Based on the Corporation’s existing portfolio, outlook and current dividend level, management expects the payout ratio in 2013 and 2014 to return to the 100% or below range. Notwithstanding this view, at the current dividend level the Corporation’s 2012 payout ratio is now expected to be higher than previously anticipated. Based on the assumptions underlying the 2012 outlook, as identified above and which are subject to change, it is unlikely that the Corporation will continue to pay the current dividend through 2014 as previously expected. The Corporation expects to gain clarity on Cardinal’s future cash flow profile in the first half of 2012. As a result, the Board of Directors and management intend to re-evaluate the Corporation’s dividend policy in 2012.

Outlook for 2011
The Corporation also updated its outlook for 2011 to reflect the impact of IFRS adjustments related to the accounting for Bristol Water. Excluding the one-time costs related to the internalization of management in April 2011, Adjusted EBITDA is expected to be approximately $70 to $75 million, which is generally consistent with the previously provided outlook of approximately $75 million. The payout ratio in 2011, which is based on AFFO and excludes internalization costs, is expected to be approximately 130% compared with approximately 120% previously. The 2011 outlook remains subject to the final purchase price accounting treatment and final transaction costs (such as stamping fees) for Bristol Water, which will be finalized in early 2012.

The common dived:

Stock in utility owner Capstone Infrastructure Corp. (TSX:CSE) dropped by more than a third on Tuesday as the company indicated it would likely be forced to lower its dividend next year.

On the Toronto Stock Exchange, shares in the owner of power plants, a water utility and an interest in a heating business in Sweden closed down $2.06, or 37 per cent at $3.54.

Roughly six million shares traded hands, making it one of the most active issues on the Toronto market.

Capstone said it would review the dividend in the first half of next year, but gave no indication of the size of any cut it might make.

The stock currently pays a monthly dividend of 5.5 cents per share, representing an annual yield of almost 11.8 per cent based on the company’s share price Monday and nearly 19 per cent based on the stock price Tuesday.

Capstone’s portfolio includes gas cogeneration, wind, hydro, biomass and solar power facilities with an installed capacity of some 370 megawatts, a 33.3 per cent interest in a district heating business in Sweden and a 70 per cent interest in a regulated water utility in the United Kingdom.

… and the preferred share price went along for the ride, closing at 15.71-99, down about 20% from Monday’s close of 19.62-20, on volume of 80,845 shares (a little under 3% of the 3-million shares outstanding).

The company is not rated by DBRS; S&P has them at P-3 and did not take any action today.

One Response to “CSE.PR.A Dives on Common Dividend Warning”

  1. […] is not rated by DBRS. CSE.PR.A was last mentioned on PrefBlog when it dived following a common dividend warning. CSE.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit […]

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