Question:
What are your thoughts on Cedar Fair? It has a nice dividend. If it is held in a retirement account, does that basically eliminate the extra paperwork of a K-1, which usually arrives after I’ve filed my taxes?
Answer:
Cedar Fair, L.P. (NYSE: FUN) is a regional amusement park operator that is structured as a limited partnership company. The company has done well for many years. It pays about a 5.9% dividend, which most believe will grow. The company cut its dividend in 2009-2010, when business was tough. We recommend avoiding Cedar Fair right now. It is a bit pricey, but it is also leveraged over 100% debt to capital.
Limited partnerships also issue a form K1 at tax time, which shows the partnership’s earnings distributions. Most often these come later than April 15, so filing your taxes may take a little extra time. If you hold a partnership in an IRA, there is a section of tax code that imposes a Unrelated Business Income Tax (UBIT) on IRAs with partnership income that exceeds $1,000 annually. The distributions paid by the partnership are considered earned income; therefore, the UBIT rule applies. Interest, dividends or royalties from traditional holdings are considered investment income, and thus, are tax-exempt in an IRA. If you choose to hold a partnership in a tax-deferred account, discuss your situation with a tax adviser.
Question:
Congratulations on your syndication to Augusta! My son works for the Delta Baggage claims call center here. I don’t know much about you guys, but what do you think of the stock?
Answer:
We feel that Delta Airlines (NYSE: DAL) is an instance where a good company does not make for a good stock. Nearly 267 airlines have failed since 2009. It is a difficult business, with high capital costs of maintaining and upgrading a fleet of planes and the unpredictable costs of fuel. We do not recommend owning airline stocks.
Question:
I work for International Paper Company, and I buy shares of the stock in my retirement plan. Is this OK?
Answer:
Traditionally, we have avoided paper companies, but we think International Paper Company (NYSE: IP) should be OK to hold. The company is internationally diverse,and has recently gained more exposure to building products. The company met its restructuring targets for cost savings, which is rare in this industry.
Keep in mind, when you invest in the company you work for, you may have the tendency to over invest. No matter how great the company is, no one firm should be more than 10% of your total portfolio. If the company were to go out of business, you would not only have lost income,but you could lose a substantial part of your savings.
At Henssler Financial we believe you should Live Ready, which includes understanding the need for diversification in your portfolio. If you have questions regarding your investments, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
