In the quiet arithmetic of modern savings, a single opinion column on December 13, 2023 held up Alaris Equity Partners, a Toronto-listed income trust, as a promising home for investors seeking steady returns. The trust pays $1.36 a year per unit, which at that moment amounted to a forward yield near 8.8%. It earns that income by supplying preferred equity to privately held, mid-sized North American firms, many of them family or founder controlled, that need capital without surrendering control. The column's case rests on that rarity of access, and on the reminder that dividends, however genero
Alaris Equity Partners' 8.8% Yield Draws Income Investors, but the Case Rests on Company Claims
In the quiet arithmetic of modern savings, a single opinion column on December 13, 2023 held up Alaris Equity Partners, a Toronto-listed income trust, as a promising home for investors seeking steady returns. The trust pays $1.36 a year per unit, which at that moment amounted to a forward yield near 8.8%. It earns that income by supplying preferred equity to privately held, mid-sized North American firms, many of them family or founder controlled, that need capital without surrendering control. The column's case rests on that rarity of access, and on the reminder that dividends, however generous they look, are never guaranteed.
Alaris Equity Partners Income Trust, listed on the Toronto Stock Exchange as AD.UN, pays an annual dividend of $1.36 per unit. On December 13, 2023, a Motley Fool Canada opinion column named it a top pick for immediate income, citing a forward yield of 8.83%. The column opened with a familiar caution: dividends are never guaranteed, and income investors should favor companies with strong balance sheets that can keep paying through market cycles. It then argued that Alaris fits that profile.
The model is straightforward. Alaris supplies preferred equity to profitable private companies, typically lower middle-market North American firms, and collects a monthly distribution in return. Those payments are set twelve months ahead and adjust with changes in top-line measures such as sales or gross profit. Partners are mostly individual or family-controlled businesses seeking growth capital, partial liquidity, or a buyout of private equity owners. Alaris targets market leaders with at least $4 million in free cash flow and typically deploys between $20 million and $100 million per transaction.
The column's strongest pitch concerns access. Public companies have roughly halved since 1996, and only about 2% of middle-market firms are listed, so Alaris offers ordinary investors a route into a market once reserved for institutions. The figures bolster the case: a 13% baseline cash yield, an EBITDA margin above 80%, and third-quarter EBITDA that more than doubled to $83.9 million. The company also deployed $130.1 million over three quarters, which the author expects to lift future dividends. The quarterly payout has climbed from $0.21 in 2009 to $0.34 in 2023.
The column is not independent analysis, though. Most of its claims come from the company's own descriptions, and it says little about the health of the partner businesses or the risks they carry. Anyone weighing that 8.8% yield would do well to read the filings closely, checking whether cash flow truly covers the dividend and whether new deployments keep pace.
Alaris Equity Partners Income Trust, which trades on the Toronto Stock Exchange as AD.UN, pays an annual dividend of $1.36 per share. At the time of this Motley Fool Canada piece, published December 13, 2023, that worked out to a forward yield of 8.83%. The article is an opinion column, and its author names the stock a top pick for immediate income.
The column opens with a general caution: dividends are not guaranteed, so income investors should look for companies with strong balance sheets that can produce steady cash flow through market cycles. It then makes the case that Alaris fits that description.
The business works like this. Alaris provides capital to profitable private companies and receives a monthly cash distribution on a preferred equity position in return. The distributions are set 12 months ahead and tied to the initial yield on the investment. They then adjust with the percentage change in certain top-line measures, such as sales or gross profit. Alaris can recapitalize up to 85% of the equity in lower middle-market North American companies, always through non-control preferred equity stakes.
The partners are mostly individual- or family-controlled businesses that need money for growth, partial liquidity, or a buyout of private equity partners. Alaris says it targets market leaders with at least $4 million in free cash flow, and individual transactions typically run between $20 million and $100 million. The company aims to add new partners each year, provide follow-on capital to existing ones, and grow organically by 3% to 5% annually within its current revenue streams.
The column leans on a pitch about access. Public companies numbered about 8,000 in 1996, and the count is now roughly half that. Only 2% of middle-market companies are publicly traded. The author presents Alaris as a way for ordinary investors to reach a part of the market once reserved for large institutions and wealthy individuals, with equity-like returns and protections resembling fixed income.
The figures cited are these. The existing portfolio generates a baseline cash yield of 13%, and the company reports an EBITDA margin above 80%, which the column attributes to a scalable model with low overhead. In the third quarter, revenue per unit was $1.04, up almost 10% from a year earlier. EBITDA more than doubled to $83.9 million, or $1.85 per unit. Basic earnings rose 109% to $1.40 per unit. Alaris also deployed $130.1 million over the last three quarters, which the column expects to lift future cash flows and dividends.
On payouts, the quarterly dividend has risen from $0.21 per share in 2009 to $0.34 per share in 2023.
Much of the case rests on the company's own descriptions of its strategy, yield, and margins, and the column offers no independent analysis. It is also silent on risks such as the health of individual partner businesses. Readers weighing the 8.8% yield should check Alaris's filings for cash flow coverage of the dividend and the pace of new deployment.
Citações Notáveis
Alaris says its portfolio generates a baseline cash yield of 13% with an EBITDA margin above 80%.— Alaris Equity Partners, as cited by The Motley Fool Canada
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