StoneMor Amends Credit, Hints at Dividend Cut, Reduction of Units

StoneMor Parnters, LP, a publicly traded death care company that owns and operates both funeral homes and cemeteries announced in a        press release on Friday, October 6, 2017, that they will be amending their secured credit facility.  You can read about the modifications here.

In reading the entire release, the Chairman of the Board, Robert B. Hellman, Jr. was quoted, “The decision to reduce our cash distribution for the second quarter is a difficult but necessary decision. . . . . While final results for the second quarter are still pending, visibility into cash flows led the Board to make the decision to use our cash to reduce leverage and target distributions at a level we believe will be more sustainable.”

The press release also reported that Paul Grady, StoneMor’s President and CEO, commented as such, “We have reduced the number of our business units to improve efficiencies, . . . . . . We continue to restructure our sales force.”

Funeral Director Daily take:  Today’s distribution from StoneMor to shareholders is at an annualized $1.32 per share.  The share price closed on Friday at $6.44 per share which makes that an incredible 20.5% dividend yield.  That truly is unsustainable in most people’s opinions, and I think it will be cut.  However if you think back to just one year ago when the stock traded for $25.36 per share on October 19, 2016, the dividend payout was $2.64 per share.  It was the decision to lop off 1/2 of it that sent the stock reeling down to about $8-10 per share and it continues to hover lower than that.

I don’t think that there is any question that StoneMor Partners has had some difficult times.  In the past year they have sliced the payment to shareholders and they have replaced many of the senior officers including the long-time CEO, Larry Miller.   When I read the press release, what I see is new management trying to right the ship as to continue as a going concern.

I’ve always said that I thought StoneMor was a “cemetery sales” company much more than a “funeral home” operating company.  Part of my thought on that is that the founders came from the cemetery side of the death care industry.  I found some information from a previous K-1 report which seems to solidify my suspicions.  According to that document they (StoneMor) mention that they received about 83.7% of their revenues from the cemetery business and 16.3% of their revenues from the funeral home business.

Another interesting thing I noticed from the recent press release is they state that they own “98” funeral homes.  In other recent documents they stated that they owned “100” funeral homes.  My guess is that part of “righting the ship” – per Grady’s announcement above – for StoneMor will be to take them back to their origins — cemetery sales and operators. They may try to put some of their funeral homes on the market to shore up their “core” business.  If so, could that be an opportunity acquisition for your firm.  Again, StoneMor owned about 54 free-standing funeral homes (46 were funeral/cemetery combos).  Maybe some research to find out where they are – you should already know if some are in your market — could lead to a great acquisition for your firm.

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