OK, terrible pun, but wholly crap, WWE (World Wrestling Entertainment) upped their dividend last week to 8.4%. I was watching the rather annoying but mildly entertaining Fast Money tonight and they had McMahon's wife on as a guest. I kind of snicker when I picture myself touting the stock of a company that stages fake wrestling matches with large oiled men and scantily clad women breaking chairs over each other, but there are a lot of attractive aspects here that can't be ignored. First of all, any investor should view a high dividend yield with skepticism. This one passes the sniff test for several reasons. Typically, an abnormally high yield is a result of a declining stock price and an impending dividend cut that just isn't reflected in the YahooFinance screen just yet (Remember when New Century Financial had a 25% yield? The stock now trades for pennies). Well, they just upped the divvy and the shares are pretty stable. So, this dividend payment should be intact for some time to come. Next, it's not a Canadian Royalty Trust (Canroy) or some other instrument with oddball tax treatment. It's a routine U.S. traded equity. Finally, it's not a financial stock or closed end fund. Most high yielders these days are either Canroys or financials, and I don't want any part of either of them. This is an opportunity to hold a low-correlation, steady performer with a sustainable yield well above anything you can earn in cash or bonds.
WWE claims to be initiating this dividend due to a favorable tax ruling. They have cash on hand that they can't invest at a rate of return higher than their internal discount rate, so they're putting it into the hands of shareholders. No one can fault them for that, right?
Let's look at some numbers:
Beta: 0.62 - There's nothing I like more than a stock that I can count on to hold its value and not move with the market strongly while paying steady dividends.
Short % of Float (as of 10-Jan-08): 7.40% - While there are some shares short, nothing that alarming. I don't anticipate rapid swings up or down short term.
Revenues are increasing and they're expanding overseas big time.
Chart - 2 year view shows little correlation to the S&P500 (as Beta would support), pretty steady support, nice range.
Disclosure: No position in WWE, but I will likely be purchasing shares in my self-directed IRA as I load up prior to April 15 for the year 2007 deadline.
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