CBS Broadcasts Dividends and Buybacks

All eyes are on CBS (NYSE: CBS  ) . Why? Well, a juicy dividend hike and a splendorous stock buyback plan were announced yesterday, two events that usually are welcome news to investors.

First, there's the dividend increase. CBS used to pay $0.22 per share per quarter. Now, shareholders will receive $0.25 every three months. Three little pennies don't sound like a lot, right? Put it in percentage terms, though, and you've got a double-digit hike -- roughly 14%.

Onto the buyback -- it has a potential value of $1.6 billion. Furthermore, CBS would like to see this done at an accelerated pace. CEO Les Moonves is clearly high on the future prospects of his media assets. He appears confident in the company's ability to deliver sustainable free cash flows, and he appears willing to court long-term holders for CBS shares.

Fools who are interested in the media sector, as well as dividend investing, will definitely want to take a look at CBS. Not only would they gain exposure to excellent properties like Showtime, The CW -- a joint venture with Time Warner (NYSE: TWX  ) -- and publishing arm Simon & Schuster, they also would gain exposure to a stock yielding approximately 3.2% based on yesterday's close price. That's actually pretty impressive for a media business.

While I like the long-term potential of other media plays such as Lions Gate Entertainment (NYSE: LGF  ) , News Corp. (NYSE: NWS  ) , and Disney (NYSE: DIS  ) , I have to concede that they aren't going to give you a nice payout while you wait. In fact, consider that big blue-chipper General Electric (NYSE: GE  ) , owner of NBC, actually yields slightly less than CBS at 2.9%. CBS has now grown its dividend by almost 80% since the beginning of 2006.

But CBS can do that. According to the latest 10-K filing, CBS has grown its net cash flow from continuing operations the past few years. In 2004, 2005, and 2006, continuing operations provided $1.6 billion, $1.8 billion, and $2.0 billion of cash, respectively. Since CBS' capital expenditures aren't hefty, a significant portion of these sums are able to flow to the free side of things. Seeing CBS use a portion of that capital for a larger dividend and a share buyback spells good news for investors.

When Sumner Redstone decided to split his old Viacom (NYSE: VIA  ) conglomerate in two, the plan all along was for CBS to be the payout play. The plan has certainly come to fruition, and I think that, at the current yield, CBS is a great stock idea for those who want to own a media concern but don't want to bet on just capital appreciation.

Read on for related Foolishness:

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 536321, ~/Articles/ArticleHandler.aspx, 10/24/2016 4:32:59 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:00 PM
CBS $56.35 Down -1.31 -2.27%
CBS CAPS Rating: ***
DIS $93.37 Up +0.34 +0.37%
Walt Disney CAPS Rating: *****
FOX $25.67 Down -0.24 -0.93%
Twenty-First Centu… CAPS Rating: ***
GE $28.92 Down -0.06 -0.21%
General Electric CAPS Rating: ****
LGF $20.12 Up +0.41 +2.08%
Lions Gate Enterta… CAPS Rating: ****
TWX $86.74 Down -2.74 -3.06%
Time Warner CAPS Rating: ***
VIA $41.90 Down -0.15 -0.36%
Viacom CAPS Rating: ***