Dividend Picks for Value Investors
Published Tue, 01 Mar 2016 13:15 CET by DividendYields.orgMany investors choose dividend-paying stocks to capitalize on steady payments as well as to the opportunity to reinvest the dividends to purchase additional shares. Many dividend-paying stocks represent financially healthy companies, which in turn, entice investors to invest in them. As a result, the stock prices of these companies increase and investors are compensated with sustained dividend payments. Furthermore, a financially stable company is more likely to increase its dividend over time.
In majority, dividend-paying stocks are less volatile and therefore appealing to more investors. Those investors invest in these stocks, thus raising the stock prices and dividend payments.
This article discusses three companies that trade in the cable media industry. All three companies have strong fundamentals, in spite of the foreign currency headwinds, and deliver strong operational results in their field. Their average beta of 1.07 and their average debt-to-equity ratio of 1.56 suggest low risk, financially healthy companies and therefore ideal picks for value investors.
Comcast Corporation (Nasdaq: CMCSA) is a Philadelphia-based media and technology company that offers video, high-speed internet and voice service in the United States and internationally. Through its Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks segments, Comcast serves U.S. residential and commercial customers in 40 states.
FY 2015 Results: In 2015, Comcast delivered solid operational and financial results across its businesses. Revenues reached $74.5 billion, up 8.3% YoY from $68.8 billion, generating a gross profit margin of 69.7% from 69.6% in FY 2014. Operating expenses were up 8.6% YoY to $58.6 billion from $53.9 billion, yet, on the upside, operating income was up 7.3% YoY to $15.9 billion from $14.9 billion in FY 2015. Net income reached $8.2 billion, down 2.6% YoY from $8.4 billion in the same period last years. Furthermore, Comcast is slightly dependent on debt financing as its debt-to-equity ratio of 0.94 suggests.
Dividend Growth & History: In FY 2015, Comcast has repurchased $6.75 billion in common shares and has made $2.4 billion cash dividend payments, totaling a $9.2 billion return of capital to shareholders for the year. Furthermore, the 2016 Total Return of Capital program includes a 10% annualized dividend increase to $1.10 per share and an increased share repurchase program authorization to $10 billion, out of which $5 billion are planned to be repurchased in 2016. Comcast’s dividend growth for the period 1990-2015 is 818.3% or 32.7% annually.
Future Outlook: Entering 2016, Comcast is expected to continue delivering strong results. Possessing a portfolio of assets that make up for one of the leading media and technology companies worldwide, Comcast will continue investing in new opportunities, including a potential expansion of the business theme park in Japan and China, or an extension of business in the Enterprise market. Analysts that follow Comcast estimate an average earnings growth of 11.13% per year through 2020 and an average EPS of $4.19 for the next four years, up 29.2% from current EPS of $3.24.
Time Warner Cable (NYSE: TWC) is a New York-based cable telecommunications company that provides video, high-speed data, and voice services across the United States. Through its Residential Services, Business Services, and Other Operations segments, Time Warner Cable company offers video services, and voice services that comprise unlimited calling in the United States, Canada, Mexico, China, Hong Kong, India, Norway, the European Union, and the U.S. territories; data services such as Internet access, network services, online backup, hosted Microsoft Exchange and SharePoint, Web hosting, and messaging solutions as well as video and online advertising inventory; and lifestyle channels. The company serves about 15.9 million residential and business services customers.
FY 2015 Results: Compared to FY 2014, Time Warner reported mixed FY 2015 results as follows:
- Revenues reached $23.7 billion, up 3.9% YoY from $22.8 billion
- Gross profit margin went 68.4% from 70.1%
- Operating expenses reached $19.5 billion, up 7.0% YoY from $ 18.2 billion
- Operating income declined 8.5% YoY to $4.2 billion from $4.6 billion
- Net Income declined 9.2% YoY to $1.8 billion from $2.0 billion
- Annualized dividend $3.00 per share, yielding 1.58% at a payout ratio of 47%
- Dividend growth since 2017, 87.5% or 17.5% annually
Future Outlook: In the fourth quarter of 2015, Time Warner has invested aggressively to drive subscriber growth, expand its customer base, and improve the customer experience. This strategy has led to an increase in sales and marketing where the company has increased spending by $79 million or 14.7% in support of higher volumes of connects. For the future, it is expected that Time Warner will continue setting ambitious targets for network reliability, and first call resolution and will be keen to enhance its product line to drive business growth. Analyst consensus estimates an average EPS of $9.16 through 2020, up 42.2% compared to current EPS of $6.44, and an average earnings growth of 7.32% annually for the next five years.
|Name||Price ($)||52 wk low||52 wk high||52 wk low %||52 wk high %||Market Cap ($ b)||P/E||D/E||Beta||Payout Ratio|
|Time Warner Cable||190.86||145.44||194.22||31.23%||-1.73%||53.66||29.41||2.50||1.00||47%|
|Twenty-First Century Fox||27.16||22.65||34.81||19.91%||-21.98%||51.82||22.80||1.24||1.15||25%|
Twenty-First Century Fox (Nasdaq: FOX) is a New York-headquartered diversified media and entertainment company that produces and licenses news, sports, entertainment, television, and movie programming for distribution primarily through cable television systems both in the United States and internationally. Through its Cable Network Programming, Television, Filmed Entertainment, and Other, Corporate and Eliminations segments, Twenty-First Century Fox operates 28 broadcast television stations, including 11 duopolies in the United States. In addition, the company offers video advertising services, including consumer engagement and on-demand marketing campaigns.
Q2 2016 Results: In the second quarter of 2016, Twenty-First Century Fox has continued to drive growth through its cable business, delivering sustained gains in advertising revenue, emphasizing the power of its global brands and distinctive programming. In spite of the foreign currency headwinds, the company has managed to deliver strong Q2 2016 results and be recognized as a leader in creating unique and compelling creative content with eight Golden Globe Awards and 30 Oscar Academy Awards nominations, double its nearest competitor.
Revenues declined 8.4% YoY to $7.4 billion from $8.1 billion. On the upside, operating expenses declined 8.6% YoY to $903 million from $988 million and operating income increased 1.2% YoY to $1.72 from $1.7 in Q2 2015. Gross profit margin increased to 35.5% from 33.4%, whereas net income declined 89.2% to $672 million from $6.2 billion. However, Twenty-First Century Fox has a dividend growth of 400% or 26.7% annually for the period 2000 – 2015.
Future Outlook: Twenty-First Century Fox is expected to continue playing a leading role in the industry. Analysts estimate an average EPS of $2.05, up 69% from current EPS of $1.21 through 2020 and an average earnings growth of 18.62% per year through 2020.
|Stock name||Dividend Yield|
|Twenty-first Century Fox||1.34|