The Real Attraction of Movie Theaters

Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

When movie theater visitors buy tickets, theater stockholders can receive rewards. Movie theater chains Regal Entertainment Group, (NYSE: RGC) Cinemark Holdings, (NYSE: CNK) and The Marcus Corporation (NYSE: MCS) all pay out dividends. Recent results suggest that business has picked up, which could make movie theater stocks more appealing dividend picks.

The Top Dog

Regal shows lots of movies. This company boasts that it's the largest theater chain in the United States, and its 577 movie theaters could provide economies of scale advantages. Regal reported good top-line results for the second quarter, with total revenue rising 16.5%. This theater chain also reported an impressive 34.2% increase in operating income.

Regal reported a slight decrease in income for the second quarter, but this theater chain incurred an expense that may have helped address one of its main weaknesses. This theater chain offers the highest dividend yield in the group at 4.4%, but it has a book value of -$4.52 per share. Regal reported a $30.7 million loss on debt extinguishment this quarter, a major expense for a company that had $36.1 million in net income. Even with its net income falling 3% for the quarter, this movie theater chain could be in better financial shape now.

The Turnaround Stock

Carmike Cinemas (NASDAQ: CKEC) has continued its recovery in 2013. As Bloomberg's Tara Lachapelle explained, in 2012 Carmike was a theater chain that had lost money for six years in a row. This theater chain has become profitable again, and it plans to expand. Carmike currently owns 245 theaters, and it wants to grow to 300 theaters. This theater chain did stop paying dividends in 2008, and it hasn't announced any plans to bring the dividend back, so its peers look better on this metric.

Carmike's second quarter results definitely show improvement. This movie theater chain reported 25.8% revenue growth and 45.3% operating income growth for the second quarter. Carmike CEO David Passman also provided another statistic that illustrates how all of these theater chains compare to their peers. According to Passman, overall United States movie theater admissions revenue rose 7.8% for the quarter.

Theaters and Hotels

Marcus' fiscal fourth quarter last year included an additional week. Even considering the timing factor, the company's 55 movie theaters didn't do very well this quarter. Marcus' theater admissions revenue dipped 13.7%, and theater concessions revenue dipped 8.4%. The company did report flat revenue growth from its hotel rooms, an improvement because of the timing factor. Marcus also blamed its film selection for its theaters' weak fourth quarter results, but Regal and Carmike still achieved higher sales with the films available last quarter.

The investment case for Marcus still remains valid, though. Carmike also announced that its third quarter 2013 results have been good so far, which suggests that Marcus could post better results for its 2014 first fiscal quarter. In the meantime, Marcus has a 2.6% dividend, and this movie theater still wins the price to book comparison. Marcus' 1.12 P/B ratio is less than Carmike's 2.16 P/B ratio and Cinemark's 2.99 P/B ratio.

International Theaters

Cinemark offers a dividend along with international exposure. This movie theater chain owns theaters in multiple Central American and South American countries. Cinemark has made a major investment in Latin America's growth markets that could offer a big payoff. MPAA figures show that Latin America box office revenue grew 86% between 2007 and 2011. Cinemark owns a total of 467 theaters, and 169 of its theaters are outside of the United States.

Cinemark reports second quarter results on August 6, 2013. After Regal and Carmike's reports, Cinemark's prospects in the United States also look promising. This movie theater chain also offers a 2.9% dividend yield.

Takeaway

Overall conditions for movie theaters look good right now, and the theaters appear confident that they can deliver in upcoming quarters. Each theater has a different attraction for investors, though. Regal pays out the biggest dividend. Cinemark offers access to Latin America. Carmike provides a turnaround play. Marcus offers value and diversification. Personally, I selected Marcus, but all of these movie theater stocks show promise right now.  

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Eric Novinson owns shares of The Marcus Corporation. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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