CuriosityStream (CURI -0.64%) may not be a name many investors have heard before. Yet the streaming service's stock is making waves in the market today. Shares rocketed higher by as much as 60% Wednesday morning after the company reported some big news in its first-quarter report.
CuriosityStream saw its revenue grow 26% year over year, and predicts as much as 37% growth in the current quarter. It also achieved positive net income for the first time. Shares remained higher by 40% at noon ET.
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Massive dividend increase
CuriosityStream offers visually impressive documentaries aimed at educating viewers. That shouldn't be surprising, since it was started by John Hendricks, founder of the Discovery Channel. The company has recently found a new revenue stream licensing its programming for artificial intelligence (AI) training, as well as traditional media distribution.
That additional licensing revenue has cash flow surging. It's been enough for the micro-cap company to initiate a dividend last year, and now to massively increase that payout. What started as an annual $0.10 dividend has already been raised several times. The streaming service announced last night that it was now doubling the annual dividend to $0.32 per share.
That represented an annual yield of 10% based on the stock's closing price on Monday. Even with today's surge higher, CuriosityStream stock now has a forward yield of about 7%. The company is in a good place to maintain that dividend, too.
Strong balance sheet, too
CuriosityStream has $39 million in cash and no debt. But CEO Clint Stinchcomb told analysts on the earnings call that the company intends to pay its dividend with cash generated from operations. The liquidity it already holds could be used to cover some payments if quarterly cash flow is "lumpy," Stinchcomb said. The company is confident, however, that overall, it will pay the dividend from operations.
CuriosityStream is keeping the cash it needs to invest back in the business, but returning any excess to shareholders. That's a sustainable model and a good reason to buy the stock for income.
