In this post I'm going to return to a stock I've written about in the past. My first post on Pinelawn Cemetery (PLWN) was written back in August of last year and it can be found here. At that time I didn't have any financial statements so I was just making an assessment based upon what little information I had managed to cobble together. Recently a gentlemen with many years experience as an investment professional reached out and provided me with a copy of PLWN's financials for the 2017 Financial year (Thanks Ron!).
PLWN's method of accounting is on a cash basis rather than the GAAP method since it is organized as a not-for-profit corporation with it's books and accounts being based upon the principles of fund accounting. The following statements include only the activity (cash receipts and disbursements) and cash & equivalents balances of the general fund.
Investments, property & equipment, other assets and liabiities are not recognized, nor is there any information on the Permanent Mantenance Fund, Perpetual Care Fund and Vandalism Fund.
Let's have a look and see what we can find out.
The above statements show that PLWN began 2017 with $1,961,521 and ended the year with $1,821,425 with cash disbursements exceeding cash receipts for the year. It also shows that PLWN is receiving rental income, $429,890 in 2017, on land it is leasing out.
The concern with a stock like PLWN is that the cemetery runs out of land to sell for new plots and the dividends dry up, the fact that it is leasing out land suggests it has quite a lot of spare capacity left.
The footnotes provide more interesting information on this issue;
We now know that PLWN owns a tract of land covering around 840 acres and that it has leased out around 225 acres to a near by golf club for a term of 75 years, with the option to terminate the lease after the 50th year if PLWN has less than 10 acres available for internment of the deceased.
Whilst we don't know the exact amount of land PLWN has filled thus far it seems reasonable to assume it has plenty of space left given that the company chose to lease out nearly a quarter of its land for a long term lease.
After digging around on the company's website I found the following in the FAQ section;
It looks quite clear then that PLWN has ample land to continue selling plots for a long time to come and that the dividend streams are not going to dry up anytime soon.
Next I wanted to find out how many shares are outstanding. Whilst no figure is explicitly stated in the financial statements I found the following in the footnotes;
As I understnd it dividends appear to be paid semi-annually from the land purchase fund to the fund certificate owners which include four directors.
We now know that a total of $3,298,530 was distributed in 2017 and I will assume that the same figure of $26 which was paid out in dividends per share in 2018 was done so in the previous year.
$3,298,530 / 26 = 126,866 shares outstanding
At a current price per share of $235 PLWN's current market cap = $29,813,510
With a current dividend of $26 per share PLWN is yielding around 11%. Not a bad ROI considering the lack of interesting investment opportunities in the wider markets at present.
Thanks for reading,
David J. Flood
UK based Value Investor.
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