Almost everyone watches television. Therefore, you would think that investing in the broadcasting industry would make sense. In a way, it does. At the current time, shareholders in the three companies mentioned below are rejoicing thanks to stock appreciation. This trend is likely to continue, but there are significant dangers over the long haul. Below, we'll take a look at a potential deal, cash flow, yield, and future potential -- all of which investors enjoy. 

Upside vs. downside potential
If you follow Belo Corp. (UNKNOWN:BLC.DL), then you're well aware of its potential merger with newspaper giant, Gannett (NYSE:GCI). This move has implications for shareholders in both companies, so let's go over some key facts. 

Belo and Gannett have planned to merge, with the agreement that Gannett would restructure and that certain Gannett television stations would be transferred to third parties. The merger would reward Belo shareholders at $13.75 per share. Shareholders and both boards approved the merger.

However, this past summer cable and satellite providers as well as media advocacy groups petitioned the deal, and the Federal Communications Commission didn't approve the merger. Belo has since opposed these petitions, stating that they were without merit. On August 22, the Department of Justice asked for a second request so it could review the proposed merger. If the DOJ approves the merger, the restructuring is complete, and there are no unforeseen events, then Belo expects the merger to close by the end of the year. You might be wondering what this means for you.

Considering that the stock is currently trading at $13.74 per share and the reward price is $13.75 per share, the upside potential is minuscule, even though the odds of success are high. Because of this fact alone, Belo doesn't look to be the ideal investment option at this time. In investment parlance, you missed it. As far as potential in Gannett goes, more on that soon. For now, let's take a quick look at Nexstar Broadcasting (NASDAQ:NXST).

It's all about cash flow
Nexstar Broadcasting and Belo have identical market caps of $1.43 billion. They have other similarities as well. For instance, Belo owns 20 television stations with a reach of more than 14% of United States television households. After recent acquisitions, Nextstar Broadcasting will own and operate 102 stations which will reach 15.5% of all United States television households.

Nexstar Broadcasting, along with Mission Broadcasting, recently agreed to acquire five television stations in three new markets. Also, Nexstar Broadcasting just announced that it will purchase Grant Company, which owns seven television stations. Based on these deals, Nexstar Broadcasting now expects next year's free cash flow to increase 5% more than previously expected.

Nexstar Broadcasting aims to continuously diversify its revenue and operating base, increasing free cash flow, which then allows it to reward shareholders.

Performance and shareholder rewards
Below is a quick glance at top-line performances for the three aforementioned companies over the past five years:

BLC Revenue (TTM) Chart

BLC Revenue (TTM) data by YCharts

Through aggressive acquisitions and diversification, Nexstar Broadcasting has been the most impressive. However, this kind of growth comes at a price. For instance, Nexstar Broadcasting's balance sheet isn't comforting, with $45.62 million in cash and short-term equivalents versus $994.30 million in long-term debt. Once again, Belo is similar, with $28.20 million in cash and short-term equivalents versus $712.60 million in long-term debt. Gannett is the only company of the three that isn't highly leveraged, with $811.37 million in cash and short-term equivalents versus $1.98 billion in long-term debt.

If Nexstar Broadcasting can generate strong cash flow, then it will have an opportunity to pay down debt. However, this still takes away from potential shareholder rewards. While the current environment favors stock price appreciation and rewards to shareholders, interest rates will eventually increase. In that environment, investors will want to opt for growth companies with healthy balance sheets that also pay a dividend -- plenty of them exist. You can simply follow this column to find them. 

As you might have noticed above, Gannett's top-line performance hasn't been impressive, but Gannett does yield 2.90% versus Belo's 2.30% and Nexstar Broadcasting's 1.10%. When it comes to diversification, Gannett wins hands down, as it owns broadcasting, digital, mobile, and publishing properties that include USA Today, CareerBuilder, Topix, and ShopLocal. All together, Gannett reaches 100 million people.

The bottom line
Belo's upside potential is minimal. Nexstar Broadcasting continues to aim for inorganic growth and diversification, which seems to be working. However, the company is highly leveraged which always leads to risks over the long haul because this impedes growth potential. Gannett looks to be the safest investment option of the three, but that's only by default.