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Is fuboTV a Great Dividend Stock?

By Lawrence Rothman, CFA - Mar 12, 2021 at 11:26AM

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There are better places for dividend investors to put their money.

It is important to establish criteria when contemplating whether a stock has achieved greatness. After all, it is a bold statement, and putting too much subjectivity can unduly influence your opinion, and result in poorly thought-out decisions.

With that said, based on my criteria, fuboTV (FUBO -3.28%) has failed to make the grade, and dividend investors should look elsewhere.

A broken piggy bank with nothing inside.

Image source: Getty Images.

Aimed for growth investors

Last October, fuboTV completed its initial public offering at $10, and while the stock has been falling since the start of 2021 its price still stands at about three times the IPO level. It currently has about a $2 billion market capitalization. While that's a nice gain for shareholders, the company is investing in growth initiatives.

With an ever-growing number of U.S. consumers cutting the cord on cable, this live television, sports, news, and entertainment streaming service is taking advantage. It ended 2020 with 548,000 subscribers, 73% more than a year prior, and average revenue per user grew by 17% to $69.19.

This propelled its adjusted revenue upward by 83% to $268.8 million. Right now, management's focus is on acquiring and engaging customers, which is why the company's adding employees and investing in product development.

Part of fuboTV's plan to differentiate itself from the competition involves its expansion into sports gambling. But DISH Network (DISH -1.58%) and DraftKings (DKNG 0.87%) are working together to provide sports betting on the former's set-top boxes, which may crimp fuboTV's growth.

Lack of dividends

For the current year, management expects revenue to reach $460 million to $470 million. While it didn't provide a profitability forecast, last year. it lost nearly $600 million on a GAAP basis.

Its focus on growth and attempting to stay ahead of the competition means it is using its resources for this purpose, rather than paying a dividend. In fact, the company has stated that it doesn't plan on paying one for the "foreseeable future."

This lack of dividends or the prospect of one means there are better alternatives for dividend-seeking investors.

Where to look

While fuboTV doesn't fit the bill, there are starting places for investors that want companies that pay dividends. A good place to start is with Dividend Aristocrats, a list of S&P 500 companies that have raised payments annually for at least 25 years. If you are looking for a more impressive and restrictive list, you can pick a Dividend King, which is a company that has increased dividends for a minimum of 50 years. In 2020, this consisted of 27 companies.

When looking at the list, one thing you'll want to see a company that generates sufficient free cash flow to pay dividends. For instance, Colgate-Palmolive's (CL 0.96%) 2020 free cash flow was $3.3 billion compared to $1.7 billion of dividends, ensuring that it can continue making payments.

While fuboTV may become one of these companies that reliably raises dividends, it is nowhere close right now. For those seeking great dividend companies, it is best to look elsewhere.

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Stocks Mentioned

fuboTV, Inc. Stock Quote
fuboTV, Inc.
$3.40 (-3.28%) $0.12
DISH Network Corporation Stock Quote
DISH Network Corporation
$20.53 (-1.58%) $0.33
Colgate-Palmolive Company Stock Quote
Colgate-Palmolive Company
$79.15 (0.96%) $0.75
DraftKings Inc. Stock Quote
DraftKings Inc.
$12.72 (0.87%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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