Market value: $3.7 billion
Distribution yield: 5.3%*
TipRanks consensus price target: $78 (17% upside potential)
TipRanks consensus rating: Strong Buy
Theme park giant Cedar Fair LP (FUN, $65.62) is in the business of fun. And so far, that business seems to be working; shares are up nearly 60% over the past five years.
But Cedar Fair also is a strong income play. This company is structured as a master limited partnership (MLP), which means it actually pays distributions, which are similar to dividends but have different tax considerations. At the moment, its yield is more than 5%.
Top B. Riley FBR analyst (view Crockett’s TipRanks profile) accepts that 2017 results were “flattened” by sub-par weather, but he “continues to see Cedar Fair as an appealing combination of growth and yield.” With this in mind, he retains his buy rating on the stock with a bullish $79 price target (20% upside potential). He continues to see mid-single-digit revenue growth as “very reasonable” given major new attractions and rides and free season passes for very young children.
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Interestingly, Crockett’s investment thesis is partly based on a bullish outlook for the theme park space in general. For Crockett, they represent “consumer favoring experiences” that are largely immune to internet threats. Given the limited construction of meaningful new theme parks in the U.S. that could pose a serious threat to Cedar Fair, FUN has a promising longer-term outlook.
*Master limited partnerships pay distributions, which are similar to dividends, but are treated as tax-deferred returns of capital and require different paperwork come tax time.
