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Summer Fun with Six Flags

04/19/2019 5:00 am EST

Focus: DIVIDEND

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Based in Grand Prairie, Texas, Six Flags Entertainment (SIX) is the world’s largest regional theme park company with 26 parks, explains Mark Skousen, editor of High-Income Alert.

The parks — including 23 in the United States, two in Mexico and one in Canada — offer various thrill rides, water attractions, restaurants, concerts, shows, game venues and retail outlets.

For more than half a century, Six Flags has entertained millions of families with multi-story water slides, world-class roller coasters — including Wicked Cyclone, Goliath, Kingda Ka, Zumanjaro and the Texas Skyscreamer -- and other family-oriented attractions.

The company hosted over 30 million guests last year alone -- and generated more than $1.5 billion in revenue. Plus, there are a number of good reasons to own this stock.

Six Flags has a well-known brand name and strong, recurring cash flow. It has excellent growth prospects and a high dividend yield. 

In addition, it is a prime example of “stakeholder” management. Stakeholder theory holds that companies (and shareholders) prosper most when every stakeholder -- employees, suppliers, customers and communities -- feels like a winner.

The interests of employees are aligned with shareholders. Customers report a high degree of satisfaction with the park experience. And local communities benefit hugely from the tens of millions of visitors that Six Flags’ parks attract.

Look at the bottom line, however, and you might be less impressed. While sales are growing at a 5% annual rate, earnings per share are down 19% year over year.

That has caused the stock to decline from over $73 a share to less than $50. (It has also boosted the dividend yield to 6.6%.) Look forward not back. The Wall Street consensus is that earnings at Six Flags will rise from $2.81 a share this year to $3.05 in 2020.

And I believe those forecasts are too conservative. So do board members, apparently. In the last five weeks, Directors Matthew Cellar and Usman Nabi have both purchased shares. Cellar bought 5,000 shares at $49.45 each. Nabi bought 5,000 shares at $50.77 a piece.

That’s an investment of nearly a quarter-million dollars each. Today, you can buy the shares as cheaply as they did. And you should.

With the economy strong, hiring up, wages rising and plenty of warm days dead ahead, this should be a very good summer for Six Flags Entertainment — and its shareholders. So, pick up Six Flags today at market. And place a sell stop at $40 for protection. 

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