Yellow dog

Jan 26th, 2010 – Comment

Without a reason to hold in anticipation of a richer payout of distributions or appreciation of the price of the units I think that its time to look for an exit.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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yellow

I bought Yellow Pages at around $14, obviously before the Finance Minister changed all the rules. It is now trading at around $ 5. I know management has to make some decisions before year end on what they are going to do as far remaining an income trust or converting to a company. Do you think a person should hold this stock or sell before it gets worse?

Thanks for you response.

Irwin

 

Hi Irwin,

About two weeks ago the 2010 Yellow Pages was delivered to my door and I had to ask myself, ” How many more years will this business last”?

I covered Yellow Pages Income Fund ( YLO.UN TSX) in June of 2009 and the case didn’t look good then and I would venture to say its not looking much better at this time.

ylo

The units are still range bound with support at $5.00 and resistance at $6.00. At its current price the distributions to unit holders yields 15.1%. The question that has to be answered is are the distributions sustainable?

You should also note that the actions of the Finance Minister changing the tax treatment of trusts back in October of 2006 didn’t hurt you as badly as the market in 2008. The retreat in advertising that has hurt all forms of media also hit the directory business. 

 

 

ylo2

The company intends on converting to a corporate structure and that means that there will be a reduction in the cash available for distribution to unit holders simply because of the taxes that will be paid on corporate income.

Nothing in the charts suggests that there will be a breakout from these levels. On a fundamental basis I can not see what would drive  sufficient revenue into the company to replace the lost revenue from the print editions of the directory.

Without a reason to hold in anticipation of a richer payout of distributions or appreciation of the price of the units I think that its time to look for an exit.

 

Happy Capitalism!

 

 

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