Comcast: Still Poised for Growth
10/18/2017 5:00 am EST
I believe longtime Growth Portfolio Core Holding Comcast Corp. (CMCSA) is one of the shrewdest players in the cable, media, and telecom space, asserts Ari Charney, editor of Investing Daily's Utility Forecaster.
Although its earnings are still dominated by its traditional cable business, the $178.2 billion company is aggressively diversifying into other areas while still generating copious free cash flows.
Unlike beleaguered telecoms, whose credit is stretched thin after a brutal four-year price war, Comcast has the balance-sheet strength to continue being a consolidator—or invest in building new networks of its own, as it’s done with its recent push into wireless.
Thus far, Comcast’s acquisition of NBCUniversal has been its biggest strategic bet. The deal transformed the cable company from a mere distributor into a content creator, giving it control of one of Hollywood’s Big Six film studios, 10 local TV stations, a dozen national cable networks, and several theme parks.
And Comcast’s recent partnership with fellow cable giant Charter Communications (CHTR) not only expands its potential wireless footprint, the temporary alliance could also give the firm more firing power if it decides to make a play for one of the wireless companies.
Despite these promising developments, fear of cord-cutting helped knock Comcast’s shares back to a more reasonable price, especially considering the company is still poised to grow earnings at a double-digit pace.
The stock is now down nearly 10% from its trailing-year high. Now Comcast trades at a moderate discount to the broad market, even though its earnings are forecast to grow nearly 14% annually through 2020.
With free cash flows averaging around $10 billion per year, Comcast has been able to repurchase significant shares while also growing its quarterly dividend 12% annually over the past three years.
Even so, most income investors would probably scoff at Comcast’s 1.7% forward yield. But all those buybacks translate into a shareholder yield of 4.6%. Hmm, not so bad after all. Comcast is a buy below $43.