11: Grupo Televisa SAB (ADR) (NYSE:TV)
Percent of Bill Gates’ Portfolio: 2.4%
Dividend Yield: 0.4% Forward P/E Ratio: 28.5x (as of 11/18/16)
Sector: Consumer Discretionary Industry: Radio & TV Broadcasting
Grupo Televisa SAB (ADR) (NYSE:TV) is a major media company in the Spanish-speaking world, a large cable operator in Mexico, and one of the biggest satellite pay TV systems in Mexico.
The company distributes its content through four broadcast channels in Mexico, over 25 pay-TV brands in Mexico and abroad, and TV networks, cable operators, and over-the-top services in more than 50 countries.
Approximately 41% of Televisa’s operating income is generated from the content it products for free-to-air and pay-TV, mostly in the form of advertising dollars. Cable generates just over 30% of operating income and provides video, high-speed data, and voice services to residential nd commercial customers.
Sky is a leading direct-to-home satellite TV system that operates in Mexico, Central America, and the Dominican Republic. It has more than 7 million subscribers and accounted for 25% of Televisa’s operating income last fiscal year.
Why does Bill Gates own Televisa? Most notably, the company’s potential for long-term growth is excellent.
Televisa is a leading producer of Spanish-language content in Mexico and one of the largest in the world. It also owns one of the largest cable operators in Mexico and a leading satellite pay-TV system in the region.
As Latin America enjoys strong population growth in the coming years, demand for Televisa’s media services should expand over time. The company’s content can be consumed by even more customers, and rising consumer wealth in the region should drive higher adoption of pay-TV services.
None of this will happen overnight or in a straight line, but Michael Larson is known for his patience.
Grupo Televisa SAB (ADR) (NYSE:TV)’s dividend history is spotty. The company has declared annual dividends in five of the last six years but is mostly focused on reinvesting for earnings growth at this time.
The stock is most appropriate for investors with a very long holding period and little need for current income today.
Follow Grupo Televisa Sa (NYSE:TV)
Follow Grupo Televisa Sa (NYSE:TV)
Honorable Mention: Arcos Dorados Holding Inc (NYSE:ARCO)
Percent of Bill Gates’ Portfolio: 0.1%
Dividend Yield: N/A Forward P/E Ratio: 19.8x (as of 11/18/16)
Sector: Consumer Discretionary Industry: Restaurants
Arcos Dorados Holding Inc (NYSE:ARCO) is the largest McDonald’s franchisee in the world as measured by total sales and number of restaurants.
The company has the exclusive right to own and operate McDonald’s franchises in 20 Latin American and Caribbean countries, including Brazil and Mexico.
Arcos Dorados went public in April 2011 and operates or franchises more than 2,100 McDonald’s branded restaurants today. Brazil is its largest market and accounts for close to half of the company’s total revenue.
Michael Larson was likely attracted to Arcos Dorados because of its strong global brand (McDonadl’s) and leading market position in key emerging markets. As consumption rises in these regions, Arcos Dorados appears well positioned to benefit over time.
However, the company’s reported financial results are being hit hard by currency headwinds. Arcos Dorados reported a first quarter revenue decline of 15%, but sales would have increased 12% on a constant currency basis and excluding Venezuela.
Arcos Dorados stopped paying dividends in 2015 because of the adverse impact currency exchange rates and weak emerging markets were having on the business. Management needed to prioritize maximizing free cash flow and cleaning up the balance sheet first.
Arcos Dorados Holding Inc (NYSE:ARCO) will likely reinstate its dividend one day, but it could be at least a year away. The headwinds impacting the business are largely still in place, but patient long-term investors might want to keep this company on their radar.
Closing Thoughts on Bill Gates’ Portfolio
Bill Gates’ portfolio of dividend stocks is concentrated in companies built for the long term. Each business has a long operating history and has some combination of hard-to-replicate assets, strong brand recognition, and numerous opportunities for long-term earnings growth. Most of them also have long track records of rewarding shareholders with higher dividends.
If nothing else, Bill Gates’ portfolio underscores the importance of focusing on the long term and refusing to compromise on business quality.
Disclosure: None
