Viacom: Home of the Colbert Report, Jersey Shore, and Spongebob Squarepants

Viacom (Nasdaq: VIA  ) is seeing a resurgence in its stock this year as it revamps content lineup on its key Nickelodeon channel. Since the beginning of the year, Viacom's stock is up close to 25%, reaching a 52 week high of $56.91. However, the stock is poised to rise further for another reason -- Viacom's stock buyback program. The program that has been put in place would see outstanding float reduced by 53% -- theoretically doubling the value of its remaining shares.

Briefly, Viacom is a diversified content provider and operator of several well-known cable networks. It also owns the Paramount film studio that has rights to popular movie series such as Star Trek, Transformers, Mission Impossible, and Indiana Jones. Through its various subsidiaries, it currently owns and operates 162 channels across 168 countries in 35 different languages. 61% of its sales in 2011 came from its media networks division that operates Comedy Central, MTV, Nickelodeon, and VH1, while the other 39% was derived from its Paramount Pictures.

Of all the publicly listed cable channels, Viacom remains the most aggressive in paying back its shareholders through generous dividends and stock buybacks while avoiding capital destructive acquisitions. With a market capitalization of close to $30 billion, its $2.8 billion stock buyback so far this year is 10% in size relative to its total market value. The company has also given another $550 million back to its shareholders through cash dividends -- further rewarding investors with cash for owning the stock.

With a plan to return $20 billion to shareholders in the next five years through cash dividend distributions and stock buybacks, Viacom's CEO, Philippe Dauman, could potentially double the value of the stock if the stocks were purchased at today's price of $56. Because the stock will get more expensive as shares outstanding decrease, in reality, it will cost the company more to buy back each share. As a result, the potential return from such a capital program might be slightly diminished.

Nevertheless, the core business of the company remains in shape, and it churned out an estimated free cash flow of close to $4 billion last fiscal year. For a company with little need for additional capital expenditure and a stable lineup of well-established content, its current market capitalization of $30 billion seems cheap. (Click here or visit Kapitall to access free, interactive tools to analyze these ideas.)

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