Comcast (NASDAQ:CMCSA) isn't exactly a beloved company among consumers, but it's doing just fine. High-speed internet is a staple, and migration to better web service has picked up in earnest during the pandemic this year. That has helped bridge what would otherwise have been a disaster for the media empire -- and made this a solid dividend stock still worth owning.

A cruel, cruel summer

The summer months are an important stretch for media companies, and Comcast in particular was poised to have an especially busy one this year. But with its theme parks mostly idled, the Summer Olympics and other sporting events postponed, and new feature film releases pushed back on the calendar, Comcast had anything but a banner third quarter in 2020. Revenue fell 5% year over year to $25.5 billion, and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) fell 11% to $7.6 billion.  

Various devices displayed in cells, illustrating internet connectivity.

Image source: Getty Images.

But net high-speed internet subscription additions of 663,000 in the quarter (for a grand total of 30.1 million at the end of Q3) propped up the large cable communications segment. Cable and broadcast TV strength also helped NBC Universal's results, and 22 million sign-ups for the streaming service Peacock helped mitigate the 273,000 net subscriber losses in cable TV (Comcast ended Q3 with 20.1 million TV customers). Across the pond, Sky was up slightly on the top line but turned in lower profitability due to high expenses as sporting events resumed after the lockdown earlier in the year.

Metric

3 Months Ended

Sept. 30, 2020

3 Months Ended

Sept. 30, 2019

Change

Cable Communications

Revenue

$15.0 billion

$14.6 billion

3%

Adjusted EBITDA

$6.41 billion

$5.80 billion

11%

NBCUniversal

Revenue

$6.72 billion

$8.30 billion

(19%)

Adjusted EBITDA

$1.29 billion

$2.09 billion

(39%)

Sky

Revenue

$4.79 billion

$4.55 billion

5%

Adjusted EBITDA

$515 million

$899 million

(45%)

EBITDA = earnings before tax, interest, depreciation, and amortization. Data source: Comcast.  

On a consolidated basis, Comcast's revenue and adjusted EBITDA are down 6% and 9% respectively through the first nine months of 2020. The theme has been consistent since March: High-speed internet additions are offsetting a mixed bag at best everywhere else. The good news, though, is that internet service is a high-profit concern. As a result, even in a less-than-perfect year, free cash flow (revenue less cash operating expenses and capital expenditures) is up 6% year over year through the first three quarters to $11.6 billion.  

Slow and steady wins the day

The free cash flow profile is important as it supports Comcast's dividend, currently yielding 2.1%. The quarterly payout to shareholders has only cost Comcast $3.09 billion this year. Thus, free cash generation handily supports the investor payday and has plenty of room to grow in the years ahead.  

Besides, the last two quarters could mark a low point for the company. Management said on the earnings call that its theme parks could return to breakeven on the bottom line in 2021, and theatrical releases should resume as well. And while Peacock's 22 million subscribers are far behind the some 38 million U.S. subscribers AT&T's HBO and HBO Max have -- let alone the far higher streaming count at Disney and Netflix -- Roku's recent addition of Peacock to its platform could help speed up the number of users and resulting advertising sales.  

Also promising is that Comcast has actually strengthened its balance sheet this year. Total cash and equivalents were $13.7 billion at the end of September (versus $5.50 billion at the start of 2020) and total debt was $104 billion (versus $102 billion at the beginning of the year). Not many mega-corporations can boast similar increases in net cash balance after eight months of pandemic disruption.  

Comcast is far from perfect, and it isn't generating rave results in its next-gen entertainment services like some of its peers. Nevertheless, I think this is a solid dividend stock worth owning, thanks in no small part to the highly profitable and growing high-speed internet segment. And at just 14 times trailing 12-month free cash flow, it could be a real bargain if business overall starts to rebound in 2021.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.