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Macquarie Infrastructure: Dividend Coverage Still Precarious

Published Thu, 16 May 2019 06:34:46 -0400 on Seeking Alpha

When we last covered Macquarie Infrastructure Corporation (MIC) we left with the message that
The dividend is still covered for 2019 but the coverage has dropped markedly. The stock has certainly lost some of its appeal here. It is still cheap on an FCF yield basis but in the sector itself, there are definitely better picks. We have had a few good trades on this one including the October 2018, $40 put sell in Wheel Of Fortune, where we made an annualized 34.62%. We will watching this one to see when to reissue a buy alert.
We would hardly call that a negative assessment but we did get to read a resoundingly positive one this morning. Readers interested in the other side of the story we are going to say, should check that out. Rida makes the case that MIC is throwing off tons of free cash flow and has low debt, and this will only get better down the line.
The Good

MIC started off the slide deck with a bang and you would think this was some technology company based on what they reported.

Source: MIC Q1-2019 Presentation
Just in case you were still in doubt if you should dump your FANG stocks for this, they hit you again with their free cash flow growth.

Source: MIC Q1-2019 Presentation
All their segments appeared to be firing on all cylinders as well and we could see a single weak spot. Their press release showed their payout ratio at 54% for the quarter.
The dividend represents a distribution of approximately 54% of the Adjusted... Read more