Scripps Networks Ups Buyback by $1B

In order to boost shareholders return, leading lifestyle media company, Scripps Networks Interactive Inc. (SNI), has raised its share buyback plan by $1 billion. Last year, the company executed a $1 billion share buyback plan, out of which nearly $647 million is pending.

In keeping with its share repurchase plan, Scripps Networks also hiked its quarterly dividend rate by 5 cents or 33.3% per share to 20 cents per share. The newly raised dividend will be paid on Mar 10, 2014 to the stockholders of record at the close of business on Feb 28, 2014.

Scripps Networks has been paying dividends uninterruptedly for the last 20 quarters with continuous increase in dividends over the period. The current dividend yield is 1.03%.

In the last quarter of 2013, CBS Corporation (CBS), Time Warner Inc. (TWX) and Viacom, Inc. (VIAB), belonging to the same industry, paid quarterly dividends of 12 cents, 28 cents and 30 cents with dividend yields of 0.7%, 1.8% and 1.4%, respectively. Hence, Scripps Networks’ dividend yield is clearly the second lowest as compared to these companies.

Scripps Networks exited the third quarter of fiscal 2013 with $556.6 million of cash & marketable securities and a lower debt-to-capitalization ratio of 0.38. A healthy cash position has allowed the company to drive earnings as well as shareholders wealth by means of buying back shares and increasing dividend payments.

On the flipside, we believe that such an aggressive stock buyback plan coupled with higher dividends payments may exert pressure on Scripps Networks’ cash flow going forward.

Scripps Networks currently has a Zacks Rank #3 (Hold).

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