Compass Diversified Declares Fourth Quarter 2024 Distributions on Common and Series A, B and C Preferred Shares

Rhea-AI Summary

Compass Diversified (NYSE: CODI) announced its Board of Directors has declared quarterly cash distributions for the fourth quarter of 2024. A distribution of $0.25 per share will be paid on January 23, 2025, to holders of Common Shares as of January 16, 2025. Additionally, distributions for the Series A, B, and C Preferred Shares have been declared. Series A Preferred Shares will receive $0.453125 per share, Series B Preferred Shares will receive $0.4921875 per share, and Series C Preferred Shares will also receive $0.4921875 per share. These distributions will be paid on January 30, 2025, to holders of record as of January 15, 2025.

The distributions should generally be considered qualified dividends for U.S. federal income tax purposes, provided the requisite holding period is met. However, CODI does not expect all distributions paid in 2024 to be qualified dividends due to expected earnings and profits being below cash distributions. Any excess will be treated as a non-taxable return of capital or capital gain. Final tax statuses for 2024 and 2025 distributions will be reported in early 2025 and 2026, respectively.

Positive

• Quarterly cash distributions declared for Common and Preferred Shares, providing income to shareholders.
• Distributions generally considered qualified dividends, offering potential tax benefits.

Negative

• Expected earnings and profits for 2024 and 2025 below cash distributions, leading to potential non-qualified dividends.

Insights

Financial Analyst

This quarterly distribution announcement reveals consistent dividend payments across CODI's share classes, maintaining $0.25 per common share and the respective preferred share rates. The dividend stability signals strong cash flow management, though investors should note the tax implications highlighted in the announcement. The expected treatment of 2024 distributions as partially non-qualified dividends and 2025 distributions potentially being entirely return of capital could impact after-tax returns significantly.

The company's market cap of $1.73 billion and consistent distribution policy demonstrate financial stability in their middle-market business portfolio. However, the tax treatment indication suggests potential earnings pressure, as distributions may exceed earnings and profits. This could signal a need for careful monitoring of the company's underlying business performance and distribution sustainability.

For yield-focused investors, the preferred shares offer higher distribution rates (7.250% to 7.875%) compared to common shares, though with different risk-return profiles. The structured payment schedule and clear record dates provide predictable income streams, valuable in portfolio planning.

Tax Expert

The tax implications of these distributions warrant careful attention. The company's disclosure about 2024 distributions likely not being fully qualified dividends and 2025 distributions potentially being treated entirely as return of capital, has significant tax planning implications for shareholders. Return of capital distributions reduce the cost basis of shares and are not immediately taxable, but could lead to larger capital gains upon eventual sale.

The preliminary guidance for 2025 suggesting all distributions may be return of capital indicates potential earnings challenges, as such treatment typically occurs when distributions exceed earnings and profits. This structural approach to distributions could benefit tax-sensitive investors in the short term through tax deferral, but requires careful basis tracking and could impact long-term tax efficiency.

The differentiated tax treatment between qualified dividends and return of capital distributions creates planning opportunities, particularly for investors in higher tax brackets. However, the final determination of tax status in early 2025 and 2026 means investors should maintain flexibility in their tax planning strategies.

WESTPORT, Conn., Jan. 06, 2025 (GLOBE NEWSWIRE) -- Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market businesses, announced today that its Board of Directors (the “Board”) has declared a quarterly cash distribution of $0.25 per share on the Company’s common shares (the “Common Shares”). The distribution for the three months ended December 31, 2024, is payable on January 23, 2025, to all holders of record of Common Shares as of January 16, 2025.

The Board also declared a quarterly cash distribution of $0.453125 per share on the Company’s 7.250% Series A Preferred Shares (the “Series A Preferred Shares”). The distribution on the Series A Preferred Shares covers the period from, and including, October 30, 2024, up to, but excluding, January 30, 2025. The distribution for such period is payable on January 30, 2025, to all holders of record of Series A Preferred Shares as of January 15, 2025.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series B Preferred Shares (the “Series B Preferred Shares”). The distribution on the Series B Preferred Shares covers the period from, and including, October 30, 2024, up to, but excluding, January 30, 2025. The distribution for such period is payable on January 30, 2025, to all holders of record of Series B Preferred Shares as of January 15, 2025.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series C Preferred Shares (the “Series C Preferred Shares”). The distribution on the Series C Preferred Shares covers the period from, and including, October 30, 2024, up to, but excluding, January 30, 2025. The distribution for such period is payable on January 30, 2025, to all holders of record of Series C Preferred Shares as of January 15, 2025.

CODI’s common and preferred cash distributions should generally constitute “qualified dividends” for U.S. federal income tax purposes to the extent they are paid from “earnings and profits” (as determined under U.S. federal income tax principles), provided that the requisite holding period is met. To the extent that the amount of the cash distributions exceeds earnings and profits, such distribution will first be treated as a non-taxable return of capital to the extent of the holder’s adjusted tax basis in the shares, and thereafter be treated as a capital gain from the sale or exchange of such shares.

CODI does not expect all distributions paid in the 2024 taxable year to be qualified dividends (assuming requisite holding periods are met) since CODI’s earnings and profits at the end of the 2024 taxable year are expected to be below cash distributions. The final tax status of such amounts will be made and reported to shareholders in early 2025, when the determination of earnings and profits for the 2024 year is completed.

CODI anticipates, but is not certain, that all 2025 distributions will be treated as a return of capital. The final tax status of such amounts will be made and reported to shareholders in early 2026, when the determination of earnings and profits for the 2025 year is completed. The final tax status of the 2024 and 2025 distributions may differ from these preliminary expectations.

About Compass Diversified (“CODI”)

Since its IPO in 2006, CODI has consistently executed its strategy of owning and managing a diverse set of highly defensible, middle-market businesses across the industrial, branded consumer and healthcare sectors. The Company leverages its permanent capital base, long-term disciplined approach, and actionable expertise to maintain controlling ownership interests in each of its subsidiaries, maximizing its ability to impact long-term cash flow generation and value creation. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and has consistently generated strong returns through its culture of transparency, alignment and accountability. For more information, please visit compassdiversified.com.

Forward Looking Statements
This press release may contain certain forward-looking statements, including statements with regard to the future performance of CODI and its subsidiaries. Words such as "believes," "expects," and "future" or similar expressions, are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and some of these factors are enumerated in the risk factor discussion in the Form 10-K filed by CODI with the SEC for the year ended December 31, 2023 and in other filings with the SEC. Except as required by law, CODI undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Investor Relations
Compass Diversified
irinquiry@compassdiversified.com

Gateway Group
Cody Slach
949.574.3860
CODI@gateway-grp.com

Media Relations
Compass Diversified
mediainquiry@compassdiversified.com

The IGB Group
Leon Berman
212.477.8438
lberman@igbir.com

FAQ

What is the distribution amount for CODI Common Shares for Q4 2024?

The distribution amount for CODI Common Shares for Q4 2024 is $0.25 per share.

When will the Q4 2024 distribution for CODI Common Shares be paid?

The Q4 2024 distribution for CODI Common Shares will be paid on January 23, 2025.

What are the distribution amounts for CODI Preferred Shares for Q4 2024?

The distribution amounts are $0.453125 per share for Series A, and $0.4921875 per share for Series B and C Preferred Shares.

When are the CODI Preferred Shares distributions for Q4 2024 payable?

The distributions for CODI Preferred Shares are payable on January 30, 2025.

What is the record date for CODI Q4 2024 Common Share distributions?

The record date for CODI Q4 2024 Common Share distributions is January 16, 2025.

What is the record date for CODI Q4 2024 Preferred Share distributions?

The record date for CODI Q4 2024 Preferred Share distributions is January 15, 2025.

How will CODI Q4 2024 distributions be taxed?

CODI Q4 2024 distributions should generally be considered qualified dividends, but excess distributions may be treated as a return of capital or capital gain.

Will all CODI 2024 distributions be qualified dividends?

No, CODI does not expect all 2024 distributions to be qualified dividends due to expected earnings and profits being below cash distributions.