Six Flags yields 4.6%, slightly less than Cedar Fair’s 5.3% dividend yield. But Six Flags’ dividend is considerably riskier.
With a payout ratio of less than 25%, I consider Cedar Fair’s dividend to be pretty safe. But Six Flags’ payout ratio is considerably higher, almost 50%. I worry that a particularly weak summer season or declining earnings would result in a dividend cut. At the very least, Six Flags has almost no room to increase its dividend while I expect such a move from Cedar Fair in the next two quarters.
Six Flags stock is also significantly more expensive than Cedar Fair’s when you consider the PE ratios of each. Six Flags trades at a PE ratio of 34.5 while Cedar Fair trades at a PE ratio of 22.2.
Meanwhile, Six Flags’ earnings are expected to shrink by 40% in 2014 when compared to its 2013 earnings. Cedar Fair’s earnings are also expected to shrink but by a much smaller amount, only 6.4%.
In a nutshell, Six Flags trades at a higher PE ratio for lower growth and a lower dividend, a dividend that is riskier than that of its rivals at Cedar Fair.
This article is brought to you courtesy of Jay Taylor from Wyatt Research.