Way back in the late 1990's, I was a huge wrestling fan. In those good old days, WWE (WWE) superstars like The Rock, Stone Cold Steve Austin, and Mankind made Monday Night Raw one of the funniest and most entertaining shows on television. So when a LongShortTrader.com reader asked what I thought about WWE the stock, my interest was more than piqued.
So is WWE the most electrifying stock in sports entertainment? Let's see.
The biggest attractions of WWE are the following:
1) Phenomenal intellectual property
2) Little meaningful competition (sorry TNA fans)
3) That big fat juicy 10% dividend yield
That's all good and nice, but I am very worried about the effects of a slowing global economy on WWE's live event and pay-per-view businesses. I suspect that pay-per-view buys won't get particularly bad since many people chip in for them, but it's safe to say that fewer people will have the money to put up money to buy PPV's.
On the live event side, I'd be very shocked if this business didn't see some negative impact from weaker consumer spending, and the stronger dollar will likely put a damper on international growth. This is especially true when you consider what the company says about its foreign-exchange risk.
In the normal course of business, we are exposed to foreign currency exchange rate, interest rate and equity price risks that could impact our results of operations. Our foreign currency exchange rate risk is minimized by maintaining minimal net assets and liabilities in currencies other than our functional currency.So don't expect hedging gains!
Plus, WWE's balance sheet is starting to weaken a bit. As of the end of Q3, the company had $204 million in net cash, down from $263 million a year ago. The WWE stated that it is cutting costs and that it is committed to maintaining its dividend, but in my eyes, the fundamentals have more room to weaken, and the declining cash balance will provide less of a cushion to the stock. And even if WWE continues to support the dividend, it certainly won't be raising it any time soon.
And in any case, if one is looking for high dividend yields, one option is the BlackRock Dividend Achiever Trust (BDV), a closed-end fund with a 9.3% yield that is trading at a 9.7% discount to its net asset value.
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2 comments:
not sure I've ever seen "intellectual property" and WWE in the same sentence before, lmao.
When I said intellectual property, I meant a large quantity of Hulk Hogan VHS tapes.
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