- CrossAmerica Partners presently offers a very high distribution yield of 11.30%, but it remains unsustainably high, and sadly, it masks an unattractive valuation.
- Their distribution payments cost virtually their entire operating cash flow and thus leave no room to fund any investments, which is particularly concerning, given their very high leverage.
- When looking ahead, they will need to ramp up investments to avert getting left behind as the clean energy transition continues unabated.
- Considering the likelihood of their distributions being halved, their intrinsic value was estimated to approximately equal their current unit price at best, which leaves no room to generate alpha.
- Even though their very high double-digit distribution yield looks appealing, in my view, it remains a trap, and thus, I still believe that a bearish rating is appropriate.
For further details see:
CrossAmerica Partners: Unsustainably High Yield Masks An Unattractive Valuation