Nexstar Media Group (NXST) is a leading diversified media company that produces and distributes local and national news, sports, and entertainment content across its television and digital platforms, including more than 300,000 hours of programming produced annually by its business units, highlights Doug Gerlach, editor of Dividend Informer.

It owns America’s largest local broadcast group comprised of top network affiliates. Nexstar’s national television properties include The CW, NewsNation, and a 31.3% ownership stake in TV Food Network.

Nexstar Media Group is also the largest owner of local television stations in the US. The company owns, operates, programs, or provides services to 200 television stations reaching 212 million people covering approximately 68% of US television households. The company’s station portfolio is primarily comprised of network affiliates of ABC, CBS, Fox, NBC, and The CW.

These network relationships give the company the exclusive right to broadcast primetime network content in its markets in exchange for affiliation fees. The networks retain the right to sell most of the advertising time during network broadcasts, though Nexstar is typically allocated some slots as well.

In addition to network content, Nexstar’s stations air programs the company produces itself, such as local news, as well as syndicated programs its stations acquire. The company receives the advertising revenue from non-network programming.

Nexstar’s business model is focused on free cash flow generation, allowing for generous capital return to shareholders. Free cash flow faced headwinds in 2023 because it was an off-cycle year for political advertising and the company was absorbing costs related to its acquisition of majority control of The CW.

However, Nexstar should remain a substantial cash generator. The company has guided to average annual free cash flow of approximately $1.05-$1.15 billion over the 2023/2024 political cycle versus a current market capitalization of under $5 billion.

The company’s strong cash generation has afforded it plenty of flexibility in capital return. Over the past twelve months, Nexstar generated over $1 billion in free cash flow. During that time, the company reduced its share count by more than 10%. Historically the company has been an aggressive repurchaser of its own shares, reducing its share count by more than 25% since the end of 2019.

Current dividend payments account for just under $200 million annually, resulting in a healthy 3.7% dividend yield recently. Debt reduction has also been a part of the company’s playbook, though its current net debt/EBITDA is 3.4x, at the low end of its target leverage range of mid-to-high 3x.

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