Earnings on Tap: Viacom
The company has enough cash in place to increase its dividend without harming itself.
Market Update
Viacom is slated to release fiscal first-quarter results Thursday ahead of the bell. According to Wall Street analysts, the company is likely to report earnings per share of $0.91 per share compared with $0.38 per diluted share reported in the corresponding period a year ago.
In November, the entertainment conglomerate reported fiscal fourth-quarter earnings that exceeded analyst estimates despite a drop in revenues. Adjusted earnings per share rose sharply by 14% to $1.21 while operating profit increased 13% to $1.05 billion. However, revenues declined 17% to $3.36 billion.
Viacom owns a number of well-known cable networks, including MTV, Nickelodeon, and BET, which are very popular with traditionally hard-to-reach audiences.
Earlier this month, the company declared a quarterly cash dividend of $0.275 per share on both its Class A and Class B common stock. Morningstar analyst Michael Corty applauds the company's decision to start paying a dividend and repurchase shares.
Chasing growth through acquisitions has been a poor use of capital in the past, with Harmonix (maker of Rock Band) a recent example, writes Corty. Initiating a quarterly dividend is a good start, according to Corty, but the company generates enough free cash flow to increase the dividend without harming its financial health.
The stock has jumped more than 11% since the start of the year and is presently trading slightly above Corty's fair value estimate.