rfj1862, if you invest in IWA for its dividend..
I would suggest that you put it in a taxed account. That is because a substantial portion of the dividend is tax deferred as a return of capital. There are some headaches associated with record keeping and tax forms related to the reduction of your original basis by these capital returns, but they are not that onerous.
The return of capital status is driven by IWA’s continued amortization of goodwill (approximately 40 million per year through 2014). At least that was a statement Craig Knock, the CFO, made in the Q4 2005 Earnings Call.
To date, the percentage of the distribution that was return of capital has been 2005 (100%), 2006 (69.65%), and 2007 (54.72%).
You should also be aware that the credit facility generally restricts the amount of dividends to the amount of “available cash,” generally defined as Adjusted EBITDA minus (to the extent not deducted in the determination of Adjusted EBITDA) interest expense, capital expenditures (unless funded by permitted debt or equity or asset sales), repayments of indebtedness, cash taxes and certain other permitted expenses. In addition, it is expected that the credit facilities will suspend the ability to pay dividends if the leverage ratio exceeds 4.80.
To date, leverage ratios have ranged between 3.5 and 3.8. As debt is being paid off, the leverage ratio has been decreasing.
