For ADN, we think the company could benefit from tailwinds related to housing shortages as well as interest rates peaking. The lumber industry can experience cyclicality, but we like the industry outlook and it trades at an intriguing low valuation multiple. Price-to-book ratio is currently 0.9x which is quite attractive. EPS is forecasted to be strong for 2024 and 2025. The dividend is high, while payout ratio is as well. We would like to see the payout ratio come down which could occur due to the factors above.
GDL saw fundmentals deteriorate in 2023 with revenue and EPS declining. GDL continues to generate strong cash flows, and despite the lagging performance, the company only pays out 22% of free cash flow in dividends which is attractive. The balance sheet is also solid with minimal debt. It is also cheap at 0.7x book value. We think there are similar tailwinds for GDL as ADN, but the decline in performance has been more pronounced than the latter.
Both companies are solid value plays and in terms of dividend safety we like GDL. Both companies will experience cyclicatlity in the lumber/timber industries but there are some potential tailwinds that could help performance.