Sports, Dividends Have Time Warner (TWX) Investors 'Tuning In' - Barron's
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Price: $59.28 -1.46%
Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 1.9%
Revenue Growth %: +2.4%
Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 1.9%
Revenue Growth %: +2.4%
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Time Warner (NYSE: TWX) shares have reversed earlier gains despite a bullish report in Barron's over the weekend.
There are a few things Time Warner does which should be attractive to most investors: pays dividends with yields that outpace the industry, buys back gobs of stock, and its more diversified in its revenue draw.
Currently, Time Warner pays 26 cents per quarter for an annual yield of about 3 percent, markedly better than the industry average of just 2 percent. The company also buys back about $2.5 billion, or 8 percent of outstanding common stock, each year. Finally, compared with companies like Discovery Communications (Nasdaq: DISCA) and CBS Corp. (NYSE: CBS) which rely on advertising for top-line growth (to the tune of 44 percent and 63 percent, respectively), Time Warner counts ad revs for about 22 percent of its top-line expansion.
Aside from TV networks like TNT, TBS, and HBO, Time Warner also holds film-giant Warner Bros. studios and the publisher Time, showing diversity across multiple media outlets.
One bear case views the networks as "throw away" assets to Time Warner, as in those are not assets viewers are clamoring to keep. But TBS and HBO have taken market share from other broadcasters -- key for Time Warner -- as 80 percent of adjusted operating income comes from its TV segment. Barron's noted TBS as the number one-rated network in the key 18-to-49-year-old category in the first quarter.
Time Warner is also becoming a bigger player in sports. Its Turner Sports network has featured NBA playoffs, the NCAA Mens Basketball Championship, NASCAR, golf, and MLB games. In addition to a 6 percent increase in first-quarter ad revs for the network, one analyst expects affiliate fees to rise into the high-single digits, with Time Warner's sports presence being a key reason.
Should affiliate fees pan out, Time Warner might realize 15 percent EPS growth annually over the next few years. Time Warner's recent 3.2 percent slide in 2012 (S&P 500 at a 4.6 percent drop) put valuation at 10.9 times this year's earnings, versus 13.0 times for peers and 12.3 times for the S&P 500.
In the meantime, there's always the dividend to keep investors satiated until shares perk up.
Shares are down 0.3 percent Monday.
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There are a few things Time Warner does which should be attractive to most investors: pays dividends with yields that outpace the industry, buys back gobs of stock, and its more diversified in its revenue draw.
Currently, Time Warner pays 26 cents per quarter for an annual yield of about 3 percent, markedly better than the industry average of just 2 percent. The company also buys back about $2.5 billion, or 8 percent of outstanding common stock, each year. Finally, compared with companies like Discovery Communications (Nasdaq: DISCA) and CBS Corp. (NYSE: CBS) which rely on advertising for top-line growth (to the tune of 44 percent and 63 percent, respectively), Time Warner counts ad revs for about 22 percent of its top-line expansion.
Aside from TV networks like TNT, TBS, and HBO, Time Warner also holds film-giant Warner Bros. studios and the publisher Time, showing diversity across multiple media outlets.
One bear case views the networks as "throw away" assets to Time Warner, as in those are not assets viewers are clamoring to keep. But TBS and HBO have taken market share from other broadcasters -- key for Time Warner -- as 80 percent of adjusted operating income comes from its TV segment. Barron's noted TBS as the number one-rated network in the key 18-to-49-year-old category in the first quarter.
Time Warner is also becoming a bigger player in sports. Its Turner Sports network has featured NBA playoffs, the NCAA Mens Basketball Championship, NASCAR, golf, and MLB games. In addition to a 6 percent increase in first-quarter ad revs for the network, one analyst expects affiliate fees to rise into the high-single digits, with Time Warner's sports presence being a key reason.
Should affiliate fees pan out, Time Warner might realize 15 percent EPS growth annually over the next few years. Time Warner's recent 3.2 percent slide in 2012 (S&P 500 at a 4.6 percent drop) put valuation at 10.9 times this year's earnings, versus 13.0 times for peers and 12.3 times for the S&P 500.
In the meantime, there's always the dividend to keep investors satiated until shares perk up.
Shares are down 0.3 percent Monday.
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