The gyrations on Wall Street have driven short-term traders crazy, but we’ve done quite well taking a long-term perspective with our high-quality, high-dividend-paying stocks, explains Mark Skousen, dividend expert and editor of High-Income Alert.
Lions Gate Entertainment (LGF.A) — based in Santa Monica, California — makes and distributes motion pictures and television shows and is a leader in home entertainment and video games.
It also licenses Starz original series productions to Starz Networks, and produces and syndicates nearly 70 television shows to approximately 25 other networks.
Lionsgate is one of the industry leaders at the U.S. box office. It typically releases more than a dozen motion pictures a year. Among the company’s biggest hits are films like “The Sixth Sense,” “Forbidden Kingdom,” “The Bank Job,” “Farenheit 9/11” and “Rambo.”
A few years ago, it bought the TV Guide Network, one of the 25 most widely distributed cable networks. And it produces leading television series including “Mad Men,” “Weeds” and “Crash.”
It also has a high box-office-to-DVD conversion rate and a prolific library of more than 12,000 motion picture and television titles. Yet the company has had a couple of big earnings misses over the last year and its stock is trading at the low end of its range.
That has attracted some major insider buying recently, including a 2.4 million-share purchase by Chairman Mark Rachesky. (Rachesky is also head of MHR Fund Management, a $6 billion investment firm.) On Oct. 2, Rachesky invested more than $22 million at $9.19 a share. Today, you can buy the stock cheaper than Rachesky did. And you should.
Lionsgate sells for 70% of book value and only 52% of annual sales. And the Wall Street consensus is that earnings are likely to quadruple from $.07 a share this fiscal year to $.28 a share next year.
And that consensus may be too conservative. We’ll get a better idea when Lionsgate reports earnings again in four weeks. In the meantime, you’ll collect a dividend yield of 3.8%. And there is plenty of short-term trading potential here.
