Viacom Enhances Shareholders' Wealth
Yesterday, the media and film producing company, Viacom Inc. (VIAB) declared that its board of directors has decided to raise the quarterly dividend by 9%. The new quarterly dividend will be 30 cents per share compared with the existing rate of 27.5 cents per share. The new dividend is payable on Jul 1, 2013 to shareholders of record as of Jun 14. This was the company’s third increase in dividend rate within three years.
Management cited Viacom’s solid balance sheet and strong cash flow as the primary reasons behind the dividend hike. The company is also pursuing a $10 billion share buy-back program. Viacom currently has a Zacks Rank #3 (Hold).
We believe that Viacom is well positioned for long-term growth as it continues to benefit from its predominant cable networks-based business model, hit movie releases, and monetization of contents from multiple distribution platforms. Viacom significantly improved its viewership ratings for its immensely popular Nickelodeon and MTV channels. In the reported quarter, the viewership rating was up 7% year over year compared with a stiff fall of 30% over the last one year.
Viacom is offering video-on-demand websites to AT&T Inc. (T)’s U-Verse customers, Time Warner Cable Inc. (TWC) and DIRECTV (DTV) subscribers to watch their content online, thereby driving their new TVEverywhere service for the years to come. Viacom highly benefits from its agreement to distribute digital content to online video streaming companies. Management is hopeful that it will be able to expand its digital content distribution deals, both in the U.S. and internationally in the near future.
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