Broadcasting & Cable TV Stocks in Focus
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The Broadcasting & Cable TV industry group has had an excellent year, outperforming the broad market. Year-to-date, the industry group has gained 26.12%, compared to a gain of 12.42% for the S&P 500.
A number of major companies in the Broadcasting & Cable TV industry were in news this week. While DISH Network (NASDAQ: DISH) and Sirius XM Radio (NASDAQ: SIRI) announced special dividends this week, Netflix (NASDAQ: NFLX) was in the news for signing a major deal with Disney. Cablevision (NYSE: CVC), meanwhile, is in the news for raising prices on its high speed internet service for the first time in a decade. Here is a closer look at the major movers in the Broadcasting & Cable TV industry group this week.
DISH Network: The pay-television provider this week joined a growing number of companies that have announced a special dividend or accelerated their dividend payments due to the uncertainty over the fiscal cliff issue. The automatic spending cuts and tax increases that will take effect on January 1, 2013 if a deficit reduction deal is not reached before the year-end include hikes in tax rates on dividends. As a result, a number of companies have pushed forward their dividend payments or announced special dividends.
DISH Network announced earlier this week that its Board of Directors approved a non-recurring dividend of $1 per share on its outstanding Class A and Class B common stock. The dividend will be payable on December 28, 2012. Shareholders on record at close of business on December 14, 2012 will be entitled to receive the special dividend.
DISH Network shares have gained nearly 0.8% for the week so far. Year-to-date, the stock has outperformed the S&P 500, gaining nearly 34%. DISH Networks shares are currently trading at P/E (ttm) ratio of 22.79, which is significantly higher than rival DIRETV’s (NASDAQ: DTV) P/E ration of 12.29.
Sirius XM Radio: The New York City-based satellite radio company on Thursday delighted its investors by announcing a $2 billion stock repurchase program and special cash dividend.
Sirius XM’s Board of Directors approved the $2 billion stock buyback program. The company said that it may purchase shares of its common stock from time to time on the open market and in privately negotiated transactions. Sirius also said that Liberty Media Corporation, which owns approximately 49.8% of the company’s common stock, has indicated that it will participate in stock buyback program on a pro-rated basis. The buyback program will be funded through cash on hand, future cash flows from operations and borrowings under the company’s revolving credit facility.
Sirius Board of Directors also approved a special cash dividend of $0.05 per share, which will be payable on December 28, 2012 to shareholders of record at close of business on December 18, 2012.
Sirius XM shares edged higher on Thursday following the announcement of the stock buyback program and the special dividend. However, the stock failed to break through $2.80 resistance level.
Sirius shares also have had an excellent run this year, gaining nearly 54% year-to-date. The stock is currently trading on P/E (ttm) ratio of 5.48, which is significant below the industry (Broadcasting-Radio) of 13.28.
Short interest in Sirius shares is currently at 8% of the total float, which is quiet high. Given the stock’s huge gains this year, short sellers are betting on a pullback.
Netflix: The Los Gatos, California-based company this week announced that it entered into a new multi-year licensing agreement with Disney. The agreement makes Netflix the exclusive U.S. subscription television service for first-run live-action and animated feature films from the Walt Disney Studios.
The announcement of the deal sparked a huge rally in Netflix shares on Tuesday, with the stock finishing more than 14% higher. Although Netflix share are up more than 9% for the week, the stock has been extremely volatile.
The stock is up more than 2% in trading today even as news surfaced that the company and its CEO Reed Hastings received a Wells Notice from the SEC over a Facebook post made by Hastings in July. In the post, Hastings said that Netflix viewing crossed 1 billion hours of videos in June. Following the post, shares of Netflix surged the most in nearly six weeks. However, the SEC has alleged that Netflix and Hastings violated rules governing selective disclosure.
Netflix shares have gained more than 28% year-to-date. The stock has rebounded this year after falling more than 62% in 2011. Netflix, which was once a favorite of Wall Street analysts, saw a sharp drop in its shares last year after the company announced a price hike. The stock also suffered as some other poor decisions from the management hurt its business.
Netflix share are currently trading on P/E (ttm) ratio of 114.43.
Cablevision: The owner and operator of cable television systems on Thursday said that it would increase its internet prices by $5 in January. The company noted that prices for its video and phone services will not be affected. Also, prices for promotional packages won’t see any changes. This is the first time in a decade that Cablevision has raised internet prices.
Cablevision shares are up more than 1% in trading today. Year-to-date, the stock has gained more than 3%, underperforming the S&P 500.
Cablevision shares are trading on a P/E (ttm) ratio of 21.90, which is higher than the Industry average.
The Broadcasting & Cable TV industry group has had an excellent year. Three of the four companies discussed above have outperformed the S&P 500. In terms of valuation, Sirius XM looks the best bet right now. Netflix’s shares look expensive at current level. Also, short interest in Netflix shares is very high at the moment.
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