- After CrossAmerica Partners spent 2020 and 2021 fighting to sustain their distributions, it appears that 2022 is shaping up to be make or break for their very high 10%+ yield.
- Whilst their 7-Eleven acquisition helped their operating cash flow, their distribution payments have still been burdensomely large.
- Management has not provided any guidance for 2022, but based upon their historical performance and estimations, it seems unlikely they could cover their distribution payments with free cash flow.
- They risk breaching the leverage ratio limit of their credit facility covenant following the third quarter of 2022, unless their earnings can increase materially without their debt increasing.
- They might be capable of achieving this feat, but even at best, their distributions will remain very risky with weak liquidity and very high leverage, and thus I still believe that my hold rating is appropriate.
For further details see:
CrossAmerica Partners: 2022 Shaping Up To Be Make Or Break For This 10%+ Yield