Our Dividend Informer analysts’ decision to feature Comcast Corporation represents something of a departure. Yes, the company is generous with capital return to shareholders, including a healthy dividend and a history of meaningful share repurchases supported by substantial free cash flow.
However, growth falls short of what we typically seek, and management has a track record of questionable capital allocation.
What potentially makes an investment in the company interesting now is its announcement at the end of June that it plans to separate its media and technology businesses into two publicly traded companies within approximately 12 months.
Comcast offers a 5.7% yield, some interesting optionality, and an investment grade balance sheet. Despite attractive assets, the company has long carried an undemanding multiple (currently 5x EV/NTM EBITDA and a forward P/E of 7.9x). This can be attributed in large part to the effective voting control of Chairman and Co-CEO, Brian Roberts, who historically demonstrated little interest in breaking up the company. The June announcement puts in place a catalyst to potentially realize value, adding to the company’s appeal.
Why to Consider Comcast Now
Planned separation into two public companies could unlock value from assets that have long traded at discounted valuations.
Attractive capital return profile has included nearly $11 billion returned through dividends and buybacks over the past year.
Investment-grade balance sheet and strong free cash flow provide support as the company navigates its planned separation.
A dividend yield of 5.7% pairs with a more than 4% reduction in shares outstanding over the past year.
Read on for a description of the company’s fundamentals, overview of operations, key projections for total return from the current price, and the all-important suggested buy price for disciplined dividend investors.
