Monday July 02, 2012
by Chuck Carlson, editor DRIP Investor
I like media stocks, especially those with quality programming. Scripps Networks Interactive (SNI) is one such player in the group.
The company operates a variety of national television networks. The stock has been a solid performer over the last year and proﬁt growth should be ample and support higher stock prices.
Scripps Networks Interactive was spun off from E.W. Scripps Company in 2008. In addition to HGTV and Food Network, the ﬁrm’s lineup includes the Travel Channel, DIY Network, Cooking Channel, and Great American Country (GAC).
This stable of attractive programming has spawned related Web sites. The ﬁ rm estimates that more than 18 million unique visitors visit its Web sites every month.
The company’s bottom line is showing good growth. Per-share profits have beaten the consensus estimate in each of the last four quarters.
For 2012 overall, the company should earn around $3.30 per share, up 15% from the previous year. For 2013, per-share proﬁ ts are expected to jump another 12% to $3.70. The jump in proﬁ ts should continue to drive dividend growth.
And the dividend yield, though fairly modest at 0.9%, should beneﬁt from double-digit dividend growth.
The dividend has jumped 60% since 2011. Even so, the current indicated rate of $0.48 per share annually represents just 15% of the company’s expected proﬁts for 2012, so there remains plenty of room to boost the payout.
The company has also been using its cash ﬂow to reduce its share count. The number of outstanding shares has declined roughly 8% since 2010.
Because of its strong market niche in the travel and home markets, plus its market cap of less than $9 billion, Scripps Networks is often viewed as a takeover play in the group.
Some of that takeover appeal is reﬂected in the stock’s P-E ratio, which is 17 times 2012 earnings estimates. However, Scripps Networks is growing its bottom line at a double-digit rate, so the premium earnings multiple seems justified.
Also, any takeover would have to be friendly, as the E.W. Scripps Trust owns more than 93% of the voting shares. I’m a fan of the stock and would feel comfortable buying these shares at current prices.
Scripps Networks scores extremely well in our Quadrix® stock-rating system, with an Overall score of 93 (out of a possible 100). I like the long-term appeal of the stock and recommend investors nibble at current prices and boost purchases on pullbacks toward $50.
Please note Scripps Networks offers a direct-purchase plan whereby any investor may buy the ﬁrst share and every share of stock directly from the company.
Learn more about this financial newsletter at Chuck Carlson's DRIP Investor.