I just picked up a small number of shares of SIX FLAGS. I hadn’t planned on buying Six Flags; however, after watching it fall over 12%, I couldn’t resist the 7.4-7.6% dividend yield. My first lot yields 7.4% and the second 7.6%.
This thing is basically at five-year lows.
I normally don’t buy such a small portion but I didn’t want to be too risky here. I do believe SIX is a bit riskier than most of my portfolio. If nothing else, I’m going to let SIX pump some dividends into my IRA account and reinvest it wherever I can that’s undervalued. Perhaps I’ll reinvest in SIX over time, we will see.
If you look at Six Flag’s books you’ll see there is some concern about the payout ratio and free cash flow payout. At the moment, it’s paying out most of its cash when it’s paying out the dividends. It can’t sustain this long-term, so we need a turnaround here. I believe within the next couple of quarters we will see SIX solve this cash flow problem.
Here is why you need to keep an eye on SIX as far as the dividend goes:
TTM FREE CASH FLOW is 264,942 vs. DIVIDENDS of 277,539
This is the red flag, whereby the Dividend is more than the Free Cash Flow. On the other hand, you’ll see that SIX was not in this position in 2018, 2017, etc.
Attendance at the parks is up, SIX just needs to figure out how to make more money, improve margins. It’s soon to get a new CEO from PEPSI, so this could bring improved results as well.