My goal when starting this blog was to find and profile companies far off the radar for most investors. I usually profile small caps, net-net's, and a lot of foreign companies. For most investors bombarded by the mainstream financial media the things I write about are really offbeat. For investors who invest in deep value global small caps a lot of names I mention seem to be common. After all there are only so many stocks globally and there are a lot of people picking through them.
From time to time I uncover a truly oddball stock, something that is both unknown and a different creature all together, Mills Music definitely qualifies. I find these stocks interesting because due to complexity or details most investors pass over them. Mills Music Trust qualifies as something hard to grasp, yet has the markings of a good opportunity.
Imagine a stock without any tangible assets, or a book value. If it was liquidated it would be worth something yet there is no balance sheet. The income statement is seven lines long, yes just seven lines. This is the quick description of Mills Music Trust.
What is it? Mills Music is a cash collection and distribution machine. Where's the cash come from you ask? It comes from EMI the music company. Mills Music owns the rights to some "oldies" songs, nothing more, nothing less. Every time a royalty event happens with a song Mills has the rights to EMI makes a note and eventually sends over a royalty. Four times a year Mills Music pays out the cash received from EMI minus some bookkeeping fees to unit holders.
The business is simple enough, cash in, cash out. The simplicity is fascinating, here is last year's income statement:
A random thought, I love the fact that they will keep less than $100 undistributed at the end of each year.
The first question to ask is why would anyone want to buy Mills Music Trust? The answer is blindingly obvious, for the yield of course. They have paid out $2.62 per share so far this year, and have paid out between $3 and $4.50 over the past five years. The stock yields close to 9% currently. Of course no one knows how much they'll pay out in the future because no one knows how many times The Little Drummer Boy will be played on the radio this Christmas either.
Here is the historic dividend history:
There really isn't much else to say about Mills Music Trust. In short old songs are played on the radio or downloaded in iTunes and Amazon, the cash is sent to EMI, who sends it to Mills Music, who sends it to you. Mills has rights to over 25,000 songs, but only about 1,500 songs actually generate royalties. The next copyright of a top 50-income generating song expires in 2018. Amazingly 66% of the royalties comes from the top 50 songs. The rights Mills Music owns seem to be as obscure as the stocks I write about.
Oldies are probably pretty stable at this point meaning the dividend is probably pretty stable until some of the songs start rolling off the copyright rights. For an almost 9% dividend this seems like a pretty safe bet.
Mills Music Trust (MMTRS.PK)
Avg Volume: 300 shares (use a limit order!!)
Disclosure: No position