Alaris Equity Partners Income Trust

The business

Alaris Equity Partners Income Trust invests in private, founder- or management-owned businesses mainly in North America, usually by buying preferred equity. Partner companies pay Alaris regular distributions that reset each year based on a top-line measure such as revenue or gross margin, not on net profit. The owners keep control and avoid selling the company outright.

Partner revenue is the core of the model. In Q2 2026, Alaris reported C$49.9M of partner distributions and C$50.6M of total partner revenue. The portfolio reached a record 25 partners, with a weighted-average earnings coverage ratio of about 1.5x. Alaris also holds common equity in some partners, which pays seasonal distributions and can produce gains when a partner is sold.

The trust is a yield vehicle. It pays a quarterly distribution from net distributable cash flow and recycles capital from partner buyouts and exits into new investments. Reported IFRS earnings include fair-value changes on investments and foreign-exchange swings, because much of the portfolio is in US dollars. Reported net income can therefore move far more than the underlying cash stream.

The moat

A long-established niche: non-control, top-line-linked preferred equity for private owners is a less crowded corner of private capital than buyout funds.

Diversification across a record 25 partners in different industries limits the damage from any single partner.

Distributions are tied to revenue or gross-margin measures rather than to profit, which can make them steadier than equity-style returns.

Financial snapshot

Most recent reported period : Q2 2026 (quarter ended June 30, 2026). Figures reflect the review date — confirm current numbers before acting.

Free cash flow yield & sustainable growth

Earnings yield : ≈13.1%EPS TTM C$3.07 / price C$23.48, StockAnalysis, Oct 13, 2026. A financial vehicle where FCF is not meaningful; EPS includes FX and fair-value gains

Standard free-cash-flow measures don't work well for Alaris. StockAnalysis shows TTM operating cash flow of −C$43.97M, with no capital-expenditure line, and FY 2025 operating cash flow of −C$124.71M. These negative figures reflect how the statements classify investment activity. They do not measure the cash that pays the distribution.

Management tracks net distributable cash flow instead. It rose 41.8% year over year to C$25.4M in Q2 2026 and reached C$58.1M for the first six months, up 20.9%. The six-month payout ratio improved to 58% from 65%. Management also projected a forward run-rate payout ratio of 60–65% and estimated run-rate revenue of C$208.4M for the next 12 months.

See the full earnings-yield ranking →

Valuation & what to watch

At C$23.48 (October 13, 2026), the units trade at a trailing P/E of 7.65 and a forward P/E of 11.90, according to StockAnalysis. The trailing figure is flattered by non-cash items. Q2 2026 earnings included C$21.1M of unrealized foreign-exchange gains, and IFRS earnings also capture fair-value changes on partner investments. The forward multiple is a more sober reference point.

The units trade at about 1.01x book value. Alaris reported a record net book value of C$25.83 per unit at June 30, 2026, slightly above the C$23.48 unit price. For a vehicle whose assets are mostly marked investments in private companies, trading near book suggests the market is neither paying a premium for the portfolio nor heavily discounting it.

Dividend

Pays a quarterly distribution annualized at C$1.56 per unit, a 6.64% yield (StockAnalysis, October 13, 2026). The latest payment was C$0.39 (ex-date September 29, 2026), up from C$0.38, and the trailing one-year growth rate shown is 11.03%. Management reported a 58% payout ratio of net distributable cash flow for the first half of 2026.

Risks & the bear case

• Partner concentration and credit risk: if a partner's business weakens, distributions can be deferred, reset lower or written down.
• Earnings are noisy. IFRS results include fair-value and unrealized currency swings, so headline EPS and P/E can mislead.
• Currency exposure: much of the portfolio is in US dollars while the distribution is paid in Canadian dollars.
• Leverage of about C$270M in net debt, plus floating-rate costs, could squeeze distributable cash if rates rise or deployment outpaces repayments.
• Growth depends on finding and funding new partners at attractive yields, and on exits that return capital on good terms.

Recent developments

2026-08-06: Reported Q2 2026 results. Partner revenue was C$50.6M (5.6% above guidance), net distributable cash flow rose 41.8% to C$25.4M, and net book value reached a record C$25.83 per unit.

2026-08-06: Disclosed a C$75.3M investment in Kubik during Q2 and a US$35.0M investment in Tesco completed after quarter-end. Capital deployed in 2026 totals C$126.1M and the portfolio has a record 25 partners.

2026-09-29: Ex-date for a C$0.39 quarterly distribution, up from C$0.38 the prior quarter.

Verdict

Alaris offers a 6.6% distribution backed by a growing stream of top-line-linked partner distributions. The payout ratio improved in 2026 and the units trade close to book value. The trailing P/E overstates the bargain, because earnings swing with fair-value and currency marks, and cash-flow-statement figures say little about distribution capacity. The investment case rests on partner credit quality and disciplined deployment. Alaris may fit income investors comfortable with private-company exposure, provided they track partner health and the payout ratio more closely than headline EPS.