The year 2015 will see lots of changes in the cable and television industry as the FCC (Federal Communications Commission) will be involved in taking some major decisions. TV stocks are facing stiff challenges in the market today because online video apps are being introduced in plenty these days. These online videos are cheaper, have more clarity and can be used in any part of the globe. Hence they have been eating away the market share of most of the cable biggies. This year, however, the FCC is trying to bring in some control on the companies providing such easy to the internet and treat them as telecom companies as well. With all these movements expected to happen this year, the following are some of the stocks that will grow well this year. Hence, analysts recommend that investors will gain a lot by investing in these stocks.
Great returns to investors
Ever since starting to pay out its dividends from 2008 onwards, America’s biggest cable operator, Comcast (CMCSA, Financial), has been recognized as a company that cares for its investors. From then until now, the company has increased its dividends by a whopping 260%. The company is expecting a major breakthrough deal in 2015 to get approved by the FCC. The deal that we are talking about here is the merger between Comcast and one of its high-profile competitors – Times Warner Cable (TWC, Financial).
If the deal comes through, Comcast will increase the number of subscribers by 33% or around 70 million houses and provide them a wide range of service like cable, internet and phone services. The success of this deal will ensure that Comcast indulges in another share repurchase program worth $2.5 billion in addition to the $2.3 billion worth of repurchases that it did during the first three quarters of 2014. The partnership of these two companies will see Comcast’s earnings per share go up to an impressive $3.30 per share for this year.
However, analysts from Canaccord Genuity believe that Comcast investors need not worry even if the partnership with Times Warner Cable does not happen. It is believed that Comcast’s shares will see an increase during this year because its 2013 acquisition of NBC Universal (a deal which helped Comcast to diversify into areas like film studios, cable and broadcast networks) will begin to bear fruit this year. Share price movement of the company for the last few months is seen below:
Content is its strength
Another TV stock that is expected to grow by quite a high margin this year is Times Warner Cable. This is because, in terms of quality of television content, the company is not only the best but also the biggest in the USA. Like Comcast, Times Warner Cable too has a dividend yield of 1.6%. For the last five years, the company’s dividends have grown by 11% at an average per year. Apart from this, the company is also looking to add more value to its investors in the form of stock buybacks. In the period between January and October 2014, the company was involved in share buybacks worth a whopping $5 billion.
During last year, share prices witnessed a slump by around 15% for 2 days, when the company didn’t accept the $80 billion acquisition bid from another media & broadcasting heavyweight, Twenty First Century Fox (FOXA, Financial). The justification for this rejection, as per the words of Times Warner Cable’s CEO, Jeff Bewkes, was that the company was good enough to perform as a standalone unit as its television content was the best in the industry currently. After the brief drop, share prices went up and reported an increase of 36% during 2014. With a forward P/E of 17, Times Warner Cable is expected to record at least 13%increase in earnings during 2015. The share price movement of the company for the last few months is seen below:
Conclusion
Investors should never lose hope in the cable and television industry, just because it is exposed to lots of volatity. The year 2015 will be favourable for the above mentioned stocks as certain rulings of the FCC will work in their favour. Both these stocks provide reasonable returns to investors. Currently, the shares are trading at a discount due to market reactions; hence analysts recommend that this might be the right time for investors to purchase these stocks and get long term benefits.
