Sport as Theater
World Wrestling Entertainment, Inc. (NYSE:WWE) is best thought of as a $700 million market cap media company, with live entertainment, television show, web site, video game, and movie assets. All of these products are built around the company’s wresting league.
World Wrestling Entertainment, Inc. (NYSE:WWE)’s revenues peaked in 2008, fell a bit, and have been relatively stagnant since. The company’s dividend has been greater than its earnings since 2006. Since dividends are paid out of cash flow, this isn’t impossible, but in WWE’s case, it hasn’t been a sustainable practice either. Dividend’s peaked at $1.44 a share on an annual basis and are now at a run-rate of $0.48 per year ($0.12 per quarter). With dividend payments still higher than earnings, future cuts can’t be ruled out.
However, the company has no debt and a material amount of insider ownership, both of which are supportive of the outsized dividends. The company’s media business, meanwhile, is a one-trick pony. As consumer tastes wax and wane, so, too, does World Wrestling Entertainment, Inc. (NYSE:WWE)’s fortunes. If demand for wrestling entertainment picks up, the company’s results and dividend paying ability will too. The shares currently yield over 5%.
Some Big Issues
NutriSystem makes and delivers complete meals to its dieters. That can be expensive, though that’s a cost that dieters incapable of successfully structuring their own meals are willing to pay. At least until economic times turned tough.
The company’s sales peaked in 2007 and have headed lower since. They are currently at about half of their peak. Dividends at $0.70 per share per year ($0.175 per quarter) have outstripped earnings for the last two years. Although there haven’t been any dividend cuts, the lingering effects of the 2007 to 2009 recession have punished the company’s financial performance and shares.
That said, for intrepid investors, this nearly 8% yielder has no debt and a notable position in the diet business. Weight loss is likely to gain in importance over time since the prevention of medical problems is the best way to keep overall costs down. Thus, NutriSystem looks to have a bright future if it can survive. Having no debt materially increases that likelihood.
High Yield Debt or Stock
With bond yields at historic lows and debt covenants loosening again, investors should strongly consider the alternative of debt-free, but risky stocks. Crown Crafts, Inc. (NASDAQ:CRWS) biggest risk is its small size, despite a fairly notable customer base. WWE relies solely on the demand for one form of entertainment and has a history of dividend cuts. NutriSystem has a struggling business that’s basically half the size it was just five years ago. However, they offer notable dividend yields and there’s no covenant risks.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article No-Debt High-Yield Alternatives originally appeared on Fool.com.
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