Landmark Infrastructure Partners: A View From The Perspective Of A Preferred Investor

| About: Landmark Infrastructure (LMRK)

Summary

LMRK commons have not performed well since inception two years ago, yet surprisingly have increased their dividend distributions.

However, according to a cursory review of its recent numbers the company appears sound financially.

I recommend further DD before placing a bid on one of these preferreds, but should you decide to, the O is certainly the better buy.

For those of you unfamiliar with my preferred investment philosophy, my article "The Basics Underlying Investments Viewed Through the Eyes Of A Preferred Investor" will explain how and why I became a preferred investor. More importantly, it will provide you the information necessary to fully appreciate and understand the process I utilize to research and determine whether or not I will invest in a particular company's preferred equities. What follows is that process.

However, before I begin I'd like to offer a shout-out to Azure Blue who brought this company and its preferreds to my attention.

When considering the acquisition of Landmark Infrastructure Partners (NASDAQ:LMRK) preferred shares, it's necessary that we view that company through a different set of eyes than we would were we interested in acquiring its common shares.

Consequently, unlike its common cousins, it's necessary that we first study the offering prospectus of the preferred shares we are interested in acquiring. To accomplish this, let's visit my favorite preferred search site, Quantum Online, which I set to open to LMRK. Below is a snapshot of a slice of that page:

A quick review informs us that LMRK is an MLP that acquires, owns and operates partnership leases in wireless communications, outdoor advertising and renewable power generation industries. It IPO'd with a market value of $272 million, making it a small company.

Let's click on Find Related Securities to examine any preferreds this company has to offer:

Here we learn that LMRK offers two preferreds (LMRKO & LMRKP), initially offered at 7.90% & 8.00%, respectively, which indicates to me that LMRK is perceived as a moderately risky company to invest in and investors are unwilling to lend it money at reduced interest rates, yet less risky than others I have reviewed. However, for some unknown reason the O was the later series to be issued, several months after the P series, which, to me, is a slight positive because the company was able to borrow at the slightly reduced rate as time passed.

Now let's click on LMRKP. Because this page contains more information than can be covered in a snapshot view, I suggest you open the page and view it as I discuss the information that most interests me:

  • I like that this preferred is cumulative, meaning that in the event that payments are suspended, they accumulate and are owed to the shareholder, and will be repaid in full if and when the payments are restored. And they must be completely repaid before the common shareholder will be allowed to receive any further dividend payments. Additionally, there are probably more sanctions and restrictions placed on the company, and will remain so until the missed payments are repaid in full. As a rule, I only invest in cumulative preferreds.
  • These shares are callable on 4/4/21 at $25.00 plus any accrued interest owed.
  • It pays a dividend of $2.00 per share per year, or 0.50 per quarter, to be paid 2/15, 5/15, 8/15, & 11/15 of each year.
  • At the time of its IPO, 8/1/12, these shares were rated WR by Moody's and BB by S&P, which really doesn't concern me but might concern a more conservative investor.
  • Dividends are not eligible for the preferential income tax rate of 15% or 20%. You should be aware of how these tax ramifications will affect your investment bottom line.
  • As usual, upon liquidation, preferreds rank senior to commons and junior to debt, both secured and unsecured.

However, simply knowing and understanding the preferred issues of a company in no way allows one to gauge a company's long-term health or to fully comprehend its business model. To better accomplish this, a knowledgeable investor should be able to dig down into the numbers and at least marginally understand a company's financial statements and conference calls.

Sounds reasonable, but extremely difficult for most investors, including myself. I often rely on interpretations by SA contributors who have proven more knowledgeable than myself. Unfortunately, the vast majority of their articles are written with the common shareholders' interests in mind, rather than those of the preferred shareholder - which, on occasion, might not be in alignment. Also, as I mentioned above, other SA members might view their conclusions in a different light. When this occurs, I simply try to figure out which argument sounds the most logical. Sorry, that's the best I have to offer.

Consequently, rather than attempting to digest and understand complicated financial statements, which I realize I won't be able to realistically accomplish with any degree of accuracy, I usually visit two websites to get an abbreviated, yet broad-based, view of the particular company I'm considering making an investment in. These are Yahoo Finance and FinViz. I have cued each to open to the financials of LMRK.

Above is a screenshot of LMRK's two-year chart. As far as I'm concerned, this is the picture of a company that has trended slightly down for much of the past two-years -- declining in price from $19.09 on 11/10/14 to its current $15.15, a $3.94 decline in value. However, according to Dividend Investor.com, during the past two years it has increased its yearly common dividend from 1.0569 to its $1.3250.

Above is a screenshot taken from a Finviz view of LMRK's present financial highlights. The company's current market value is $335.57 million. It earned $2.5 million on sales of $41.30 million. Year to date, it's up 12.69%. Its short- and long-term debt/equity is 1.11.

Now let's see how its preferreds performed, as illustrated by the following MarketWatch charts:

LMRK Preferreds 12-26-16

Symbol Callable Yearly Dividend Price Dividend/Price Yield Best
LMRKO 8/8/21 1.975 24.20 1.975/24.20 8.16% Best
LMRKP 4/4/24 2.00 25.35 2/25.35 7.89%

O is a better buy because of its higher yield and because it's priced below par and offers the greatest capital gain if and when it's called.

However, as far as I'm concerned, before you decide to invest, I urge that you do a deeper dive into the numbers and some further DD. I'm not overly impressed by the performance of this company since its inception over the past two years and I believe further investigation is warranted.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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