The BP Royalties Income Fund released Q1 results before the open. The results were better than I feared they might be but not as good as I hoped. Distributable cash per unit was down 0.7%. The trailing payout ratio was about stable at 103.4%. Same-store sales were down 1.3%. They were unchanged at 0.0% on the more important franchise-sales basis (which drives the franchise fee collected by the fund).
BP needs to begin to generate increases in same-store sales driving increases to distributable cash per unit. Otherwise it is going to have to cut its distribution. It would likely be a small cut and the cash distribution would remain attractive. However, the market would likely react quite negatively. They have indicated they have new menu items and promotions to drive sales but so far the results are not apparent. The next two quarters will need to show progress.
Despite the very attractive 7.8% cash yield, I am losing my enthusiasm for this name. It appears to be losing market share to newer entrants. Historically, they have been able to slowly increase the distribution even if just due to menu price inflation. Recently there has been some headwinds.
It may be prudent to trim this position.