CBS (CBS) owns the most-watched television network in the U.S. and one of the world’s largest libraries of entertainment content, notes Chuck Carlson, dividend reinvestment expert and editor of DRIP Investor.

Businesses include CBS Television Network, The CW (a joint venture between CBS Corporation and Warner Bros. Entertainment), CBS Films, Showtime Networks, CBS Sports Network, and Simon & Schuster.

The company has been making a lot of headlines in recent months, but mostly for the wrong reasons. The legal battle between top executives and controlling shareholder, National Amusements, garnered much attention. And the high-profile exit of its long-time CEO Les Moonves was another major distraction.

The headlines have overshadowed solid operating performance by the company. Per-share profits have beaten estimates in each of the last four quarters, and the firm’s efforts in digital streaming continue to accelerate.

The firm continues to add to its content vault with five new company-owned programs in its prime-time CBS network lineup. Also, its direct-to-consumer streaming services continue to grow at a healthy rate and are on track to reach a combined eight million subs, a year ahead of original projections.

Content licensing and distribution fees should also contribute to healthy earnings in 2019. For 2019, CBS should earn at least $5.75 a share, giving the stock a P-E ratio based on that estimate of just over 8. That seems to be a very modest valuation for a company that is succeeding greatly in transforming its media business into the digital world.

The valuation is probably being held back by the possibility of a CBS merger with Viacom (VIAB) sometime over the next 24 months. However, investors seem unduly pessimistic based on this speculation.

The stock’s price adjustment in the last month has created an excellent value play in CBS shares. A kicker to the capital-gains potential is the stock’s yield of 1.5%. Given the company’s size — market capitalization is less than $18 billion — CBS even has some takeover appeal for a media company wanting a treasure-trove of company-owned content and a digital model that is working quite well.

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