Stonmor LP not Dying (STON) - Follow up

A couple weeks ago I wrote about Stonmor LP. STON, which is the second largest player in the not so well liked but profitable funeral business. Today there is a fire sale on the shares because of an announcement by the company in which they state that 4,549,396 common units of limited partnership interests are going to be offered. Stonmor LP, meaning the general partners, is selling 2.8 million new units. At the same time some unit holders are selling 1,849,366 more units. In the current environment investors and traders are in a shoot first ask questions later mode so the shares are being sold rather than looking at the bigger picture. The current shareholders are taking Stonmor's offering to be a bad thing because they do not understand what is actually happening here. The 1.85 million of shares are coming from the existing float so they are not dilutive, but instead this will be neutral to current shareholders. The 2.8 million shares could be considered dilutive but in the near future they benefits provided from the sale will far outweigh the dilution of about 15%. The proceeds are being used primarily to ELIMINATE high interest debt that the partnership is carrying. Additionally, they are prepaying the borrowings on their credit lines and funding unspecified capital improvements. Moreover, Stonmor just raised their dividend which is something that would not be done if they were concerned about meeting it. The management of Stonmor knew well ahead of time that they were going to sell units and they would have to cover the same dividend across all units. Stonmor currently has outstanding bond obligations at coupon of 12.5% as well as other credit lines at high rates. The elimination of this added interest expense will allow Stonmor to not only keep the dividend but should lower overall operating costs that should lead to higher earnings and larger pass-throughs to unit holders in the future. I actually see this as a good move for Stonmor to contain costs and gear up to be even more profitable in the future. So it is not as exciting as buying Netflix NFLX but Stonmor does pay a handsome dividend of 7.2% and management does appear to be setting up for increased earnings. Stonmor is in a steady industry and should provide income stream stability for many years to come. Unfortunately we all have to pass from this mortal coil but you can profit from that sure thing while you are here. As the old saying goes “the trend is your friend” and right now with an aging population Stonmor is in a trend industry. If you wanted to own Stonmor in the past this is a great time to get in as Mr. Market is giving you an opportunity because of what I believe is investor myopia. Disclosure long at $30.25 I post this column on Thursdays here at Benzinga although I do have my own blog (monetaadvisors.com) where I cover stocks, commodities, precious metals, currencies, markets, government and interesting general observations that may not get play on Wall Street as well as subjects that interest me and hopefully you too. I also have a Twitter Feed @monetaadvisors if you are interested. I am a Series 65 Investment Advisor Representative and have recently started my own investment advisory called Moneta Advisors, LLC, based in the Boston area. I have been through a series of careers from which I have learned many useful things along the way. In my past I have been a stockbroker, computer programmer, Sr. computer consultant, and ran a manufacturing company; all the while I remained a private investor.