Welcome to the Stock of the Day.
Cable giant Comcast (CMCSA) just announced a partnership with Apple (AAPL) to bring television into the 21st Century. With Comcast stock in the spotlight, is now a good time to pick up this “triple play” (earnings, dividends and stock buybacks) stock?
Find out now.
Comcast, as you probably know, is a huge player in media, entertainment and communications. It is perhaps best known for Comcast Cable, which beats out Time Warner Cable (TWC) as the largest cable operator in the U.S.
On top of this, the company is known for its “Triple Play” package, which also offers voice and high-speed internet services for residential and business customers. What many don’t realize is that Comcast also has a hand in the networks that it includes in its cable service, with full ownership of NBCUniversal and significant holdings in E! Entertainment, Style Network and G4, among others.
Comcast has been aggressively buying its stock back and shows no signs of slowing down. In 2013 the company repurchased $500 million of its stock. And recently the company increased its ongoing stock buyback program to $7.5 billion—of which Comcast expects to spend $3 billion in 2014 alone.
Last year, Comcast also returned $510 million to shareholders in the form of dividends. Comcast has recently increased its dividend by 15% to an annual payout of 90 cents per share.
For its next dividend, Comcast stock shareholders of record on April 2 will receive 22.5 cents per share on April 23. The stock currently yields over 1.7%, making CMCSA one of the highest yielding stocks in the industry.
Comcast is also doing decently in terms of sales and earnings growth projections. For the current quarter, Comcast is expected to post 64 cents in EPS on sales of $17.01 billion. Compared with last year this represents 11.1% sales growth and 25.5% earnings growth. For the following quarter Comcast is headed towards 4.7% sales growth and 10.8% earnings growth.
Looking ahead to FY 2014 and FY 2015, Comcast is expected to continue growing sales in the mid-single-digits and earnings in the mid-teens. We’ll have to see how the latest deal with Apple affects sales and earnings in the long-term. In the meantime, the company releases first-quarter results before the open on April 22.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. For much of the past year, Comcast stock remained solidly in buy territory thanks to solid fundamentals (B-rated Fundamental Grade).
However, in August institutional buying pressure deteriorated for this stock, indicating that the risk-to-return ratio for CMCSA was slipping. So I was compelled to downgrade it to a C-rated hold. Even so, I like the company’s growth prospects, its hefty share repurchase program and that it is aggressively working to increase its subscriber base.
I need to see buying pressure improve before I upgrade it again to a buy, but I’ll be taking a close look at the latest data over the weekend to see if it’s time to revise this recommendation.
Bottom Line: As of this posting I consider Comcast stock a C-rated Hold, but this rating could very well improve.
Would you like to check the fundamentals backing up one of your stocks? For more stock grades, please visit my Portfolio Grader website!