Mar 14, 2014: Bought 55 shares of MDP at $45.18 per share.
Founded in 1902 and headquartered in Des Moines, Iowa, Meredith Corporation (MDP) is one of the leading media and marketing companies in the U.S. with interests in publishing, broadcasting, integrated marketing and interactive media. The company operates in two business segments: National Media and Local Media.
MDP is a Dividend Contender with a 21-year streak of dividend increases. It pays quarterly dividends in March, June, September and December. The current dividend is 43.25¢ per share, so my starting yield on cost is 3.83%.
Over the past 10 years, MDP's share price performance has been unimpressive. It has decreased by 11%, while the S&P 500 has increased by 64%. However, since 2009, MDP has performed reasonably well.
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Analysis of MDP
My fair value estimate for MDP is $51.00, so I picked up shares at a discount of about 13%. The following table provides some key statistics for MDP, with highlighted values relating directly to my selection criteria.
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- Debt to Equity ratio is below 50% (39%)
- Price to Earnings ratio (P/E) is less than 20 (TTM is 17.37; forward is 13.88)
- P/E to Growth (PEG) ratio is less than 2 (1.16)
The single criterium of concern is MDP's EPS% payout, which is somewhat high at 67%. The following graph shows MDP's earnings per share and dividend growth over the last 10 years:
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The loss in 2009 was due to a "non-cash impairment charge" related to FCC licensing and goodwill, a non-cash charge to earnings which doesn't affect liquidity, cash flows, or future operations. Without the charge, MDPs earnings per share would have been $2.03 in 2009.
MDP passes all but one of my selection criteria and earns 6 stars: (*******)
Other ratings for MDP
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Concluding Remarks
MDP is my second holding in the Consumer Discretionary sector, increasing DivGro's diversification. Except for the Materials sector, I now have at least two holdings in every sector in DivGro.
MDP is a good pick for growth and income investors. Through its Total Shareholder Return strategy, the company plans to boost stakeholder value through dividends, share repurchases and strategic investments in business to drive growth. MDP already boasts a strong portfolio of women's magazines and is focused on bolstering advertising revenue, primarily in the digital space. It is also levering its brands through strategic alliances and brand licensing, which supplements sales.
More than half of MDP's revenues are derived from advertising, which is a very competitive environment to operate in. Although the economy is gradually recovering, persistent headwinds may stymy the company's performance. Nevertheless, I like MDP at this discounted price!
55 shares of MDP adds $95.15 of expected dividend income, increasing DivGro's projected annual dividend income to $3,494.63.
MDP is the 27th holding in DivGro.
Do you own shares of MDP? Any interest in buying shares at this time?
MDP is a position that will definitely require some additional research, but as a service company, has the ability to generate some terrific cash flows as a result of the lower capital expenditures.
ReplyDeleteThanks for stopping by... After seeing MDP appear in my 10 dividend stocks list for 3 months in a row, I had to look into it. The company looks pretty solid to me, has good growth prospects and pays a nice dividend. Hopefully it will continue to generate the earnings to continue to grow its dividends.
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