DIRECTV Is Flying High in Latin America

DIRECTV (Nasdaq: DTV) has been racking up some big customer gains as subscribers have flocked to its service in the U.S. and Latin America. It is the leading direct-broadcast satellite service in the United States that's also experiencing spectacular growth in emerging markets. At the very least, the stock should be on the radar of long-term investors.

Its first-quarter numbers will be released this week, but what is really impressive has been the company's long-term growth. Over the past 10 years, earnings per share have grown an average of 13.83% a year, and revenues glided up at an 11.76% clip. I believe the company can keep it up and perhaps even exceed expectations in the years to come. Here's why.

Growing abroad
DIRECTV has more than 19 million U.S. and 8.9 million Latin America subscribers. It is a leader by a wide margin over No. 2 DISH Network (Nasdaq: DISH). Total worldwide subscribers increased nearly 12% on a year over year basis. Latin America growth was eye-popping with a 37% increase.

The big theme is the expansion in emerging markets south of our border. Mexico and Brazil are prime examples of countries the company serves with a fast-growing middle-class market. A whopping 70% of the population is younger than 40 in these countries. This is the stuff of which booms are made of. Pay-TV penetration is only 25%, according to the company, and supposedly, the market can double by about 30 million subscribers in the next five years.

Bundle up!
One of the knocks on DIRECTV is that it isn't able to compete with telcos and cable companies that have bundled services. The company has actually partnered with telcos such as CenturyLink (NYSE: CTL) and Frontier Communications (NYSE: FTR) so its video content can be bundled with telephone and broadband. The plan is to have the ability to offer DIRECTV with the telcos' broadband services in 90% of the United States.

There is no denying that Netflix (Nasdaq: NFLX) has been a disruptive force, bringing entertainment to the home through both its mail and streaming services. But in my opinion, it's not disruptive in a way that people are cutting the cord to cable and satellite providers for a company that basically streams movies and reruns for $7.99 a month. In a letter to shareholders, Netflix management admitted that the service is more of a supplement to cable and satellite companies and not an outright replacement.

While we're on the subject, subscribers can order the latest releases through DIRECTV even as they are still in theaters. Many titles are actually available a month before you can see them on Netflix. It has more than 6,000 shows and movies available at no extra charge. This year also marks the arrival of TV Everywhere, allowing subscribers to watch programming on cell phones, laptops, the iPad, and even the TVs in your minivan. This is a great example of management keeping an eye out for growth opportunities and defending market share.

The pay-TV business is ultra competitive, and the road's seemingly tougher with the emergence of Netflix, DISH Network buying Blockbuster, and cable companies and telcos offering bundled services. But the proof is in the numbers and previous long-term shareholder gains. DIRECTV continues to deliver to its customer base and has the momentum to do the same for shareholders going forward.