Should I Buy British Sky Broadcasting Group?

LONDON -- It's time to go shopping for shares again, but where to start? There are loads of great stocks to choose from, and I've got my wallet out. So here's the question I'm asking right now. Should I buy British Sky Broadcasting (LSE: BSY  ) ?

Bad sports
It is easy to forget how so many Brits looked down on media company BSkyB when it first launched. They sneered as satellite dishes popped up on the nation's homes like mushrooms. They snorted at the idea of a pay channel devoted to Premier League. And they shuddered at the thought that controversial Australian newspaper owner Rupert Murdoch was involved. Now Sky Sports is a national institution and BSkyB's share price has been a regular matchwinner. So is now a good time to buy it?

Busy as a BSkyB
BSkyB continued its run of good form last year. In the three months to Sept. 30, 2012, it overtook TalkTalk to become the U.K.'s third-biggest broadband provider, adding 102,000 new subscribers to take its total to 4.1 million (market leader BT has 6.3 million subscribers, while Virgin Media boasts 4.2 million). Total revenue also performed well, rising 4% to 1.7 billion pounds. BSkyB has a strong cross-selling operation. One in three customers now take three services -- TV, broadband, and telephony -- up from 28% in the same period last year. HD customer numbers have also been growing strongly. The good news overshadowed the slowing number of TV subscribers, and a 6% drop in pre-tax profits to 288 million pounds. That was partly due to BSkyB having to splurge yet more money on Premier league rights, after BT emerged as a surprise rival bidder. It suffered several broker downgrades on talk of foreign competition for football rights, but BSkyB has defended its position well in the past -- at a price.

BSkyB is still 39% owned by News Corp., although plans to take full control were sunk by last year's phone-hacking scandal. Whatever you think of the Murdoch dynasty's politics or journalist ethics, it is hard to knock its business success. Shareholders are back onside. After forcing out James Murdoch in the wake of the phone-hacking scandal last April, they reelected him to the BSkyB board in November as a non-executive director, with 95% support.

To BSkyB or not to
BSkyB has been chucking money at its shareholders. Last November, it announced a 500 million pound share buyback program. Its progressive dividend policy delivers roughly half of earnings to shareholders, and it currently yields around 3.2%, comfortably covered, which gives scope for future increases. It has also delivered rapid earnings-per-share growth of 24%, 30% and 22% in the three years to 2012. But that is predicted to slip to 10% and just 6% this year and next.

We are just days away from BSkyB's next set of interim results for the second half of 2012. I will be looking to see how well it continues to win new clients, especially in broadband and telephony, and any word on its overseas expansion plans. I will also be looking for an update on whether its new pay-as-you-view film option will offset that slowdown in new customer numbers.

BSkyB has delivered steady growth and rising income to shareholders, and its share price is up 17% over the past 12 months. That puts it on a price-to-earnings ratio of around 14 times earnings, which isn't excessive in the wake of the recent surge. Given the way it has held on to its customers during the crisis, BSkyB is certainly keeping it tight at the back. That makes it a Premier League investment.

BSkyB is the limit
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