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What are we looking for?

Highly sustainable dividends from profitable – and growing – U.S. media companies.

The screen

Media companies continue to look for ways to attract consumers and, of course, advertising dollars. At the same time, demand for media content – accessible from a range of devices – keeps expanding.

That demand also drives merger and acquisition activity in the United States, including Meredith Corp.'s recent $2.8-billion (U.S.) deal to buy Time Inc. – publisher of Sports Illustrated, Fortune and Time magazines. AT&T is another headline-grabber with its $108-billion battle for Time Warner, parent of HBO, CNN and the Warner Bros. movie studio.

Companies with a track record of profits and dividends are still the best way to tap media growth. (Our search also focused on stocks with low price-to-earnings ratios and strong growth prospects.)

We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five.
  • Two points if it has raised the payment in the past five years.
  • One point for management’s commitment to dividends.
  • One point for operating in non-cyclical industries.
  • One point for limited exposure to foreign currency rates and freedom from political interference.
  • Two points for a strong balance sheet, including manageable debt and adequate cash.
  • Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments.
  • One point if the company is a leader in its industry.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated seven stocks. Apart from Meredith and AT&T, Tegna owns 64 top U.S. television stations, with a strong foothold in lucrative sports broadcasting; it's also a top takeover target. Disney leads family entertainment, while Gannett owns more than 100 newspapers, including USA Today. Viacom's host of global media brands includes MTV, BET and Comedy Central. Entravision is a leader in the growing Spanish-language media markets in the United States and Mexico.

We advise investors to do additional research on any investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

Select dividend-paying U.S. media firms

Ranking*CompanyTickerDividend Sustainability RatingMarket Cap. ($ Mil. U.S.)P/E RatioDividend Yield %Points
1AT&T Inc.T-NHighest217,443.411.85.711
2Walt Disney Co.DIS-NHighest156,189.518.01.510
3Meredith Corp.MDP-NAbove Average3,
4Viacom Inc.VIAB-QAbove Average11,711.27.03.08
5Entravision CommunicationsEVC-NAbove Average616.53.53.17
6Gannett Co.GCI-NAverage1,
7Tegna Inc. TGNA-NAverage2,834.38.12.26

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.