When it comes to investing in the entertainment business, movies and money are connected at the hip. Success in one nearly always leads to the other.
The business of making TV and movies is a fascinating market, dominated in the U.S. by a group of six major studios. And conveniently for this article, these production studios are in turn owned by six major publicly traded media companies, of which all but one pay out dividends to their shareholders. So let's further investigate the income-investor prospects at The Walt Disney Company (DIS -1.19%), Comcast (CMCSA -1.40%), Time Warner (TWX), Twenty-FirstCentury Fox (FOXA) (FOX), and Viacom (NASDAQ: VIA) (VIAB).
The largest media company in the world, Disney has earned a much-deserved reputation for delivering investor returns. Its shares have trounced the S&P over most historical periods, though the House of Mouse has done so primarily through earnings growth and not dividend payments.
The company has grown its dividend at an average annual rate of 8% over the past decade, although the financial crisis from 2007 to 2009 probably stifled the dividend plans of even the strongest companies. Disney shares currently yield 1.3%, well below the broader market. Overall, Disney remains one of the best media stocks under the sun, even if its income-investing profile isn't as exceptional as other parts of its financial performance.
Like Disney, Comcast has demonstrated a track record of market-beating returns, while also placing a far greater emphasis on returning capital to shareholders. The company returned to paying a cash dividend in 2008 after a roughly decade-long hiatus, but it has increased its payout every year since; it has already done so for 2017 as well. All told, Comcast has grown its dividends at an average rate of 18% during this period.
Turning to its big-picture narrative, Comcast finds itself well positioned to benefit from the future direction of the cable industry. With the launch of its own wireless service later this year, Comcast will be one of only two media or telecom companies -- the other being AT&T (T -0.27%) -- with the technical infrastructure and content assets to distribute cable broadcasts over wireless networks.
Since it will soon be acquired by AT&T, let's focus on the latter's dividend track record. Fortunately for Time Warner shareholders -- who will receive a 50-50 split between cash and AT&T stock -- the telecom giant has raised its dividend for 32 consecutive years. Equally alluring, AT&T shares currently yield 4.7%, and the company has signaled that the Time Warner acquisition shouldn't infringe on its dividend payments and will help accelerate its capital return over the long term. As mentioned in the Comcast section, Time Warner will help AT&T launch its own wireless TV bundle, which should provide it with significant competitive advantages over its various telecom rivals.
Twenty-First Century Fox
Though it has only operated as an independent since 2013, Twenty-First Century Fox has established its own impressive track record of dividend payments in the years since it separated from News Corp. Today, Twenty-First Century Fox shares only yield 1.1%. However, the company's low 20% payout ratio suggests that future dividend increases are more likely than not.
Interestingly, with content assets being snapped up left and right, Twenty-First Century Fox could also prove an interesting acquisition target in the coming years. Perhaps along this same line of thinking, one of Warren Buffett's two stock-picking lieutenants at Berkshire Hathaway has established a small position in the media company.
Unlike many of the other names on this list, movie and TV giant Viacom has struggled mightily in recent years; its shares are down 46% over the past three years. The company's high-profile succession drama has clearly hampered its execution, and it isn't entirely clear when or how this saga will conclude.
However, the market's bearishness has driven down Viacom's stock valuation to bottom-of-the-barrel levels; it currently trades at just 12 times earnings. Those interested in Viacom as a contrarian investment will need strong stomachs, though: The company halved its dividend per share last year, so its stock only yields 1.7%.