Power Slam Dividends - WWE

If there is one thing which is synonymous with dramatic entertainment, it’s the antics of the stars of the World Wrestling Entertainment (WWE) company. However, a lesser known fact is that when it comes to dividends, this company doesn't play around.

Shareholders enjoy a yield of around 10% and a 5-year dividend growth figure of 17.5%. One factor which could potentially be counting against it though is that the company does trade on what could be considered a high price to earnings multiple of around 20 times earnings.

While the brand may be the butt of many jokes, there is no question about its popularity. WWE (WWE) programming is broadcast in more than 145 countries and 30
languages and reaches more than 500 million homes worldwide. In March this year its flagship website WWE.com had more U.S. visits than premiere pop culture and sports hubs Nickelodeon.com, PerezHilton.com, CBS.com, NBC.com, NBA.com and NFL.com according to online tracking company Hitwise. On March 29, WWE.com had its second highest day ever in terms of page views with 88.8 million.

The brand showed its resilience in 2008 when despite the global economic recession it managed to raise dividends from 2007 and then hold steady at $1.44 in 2009.

This was reflected in the second quarter earnings reported in August. Revenues totaled $106.8m in the second quarter, yielding operating income of $10.3m which was roughly in line with the 2009 second quarter revenue of $106.6m and operating income was $13.1m. The important aspect to consider is that in 2009 its high profile "WrestleMania" event fell into the first quarter in 2010 but was in the second quarter in 2009.

This year WrestleMania contributed approximately $32.2m of revenues and $15m of profit.

While revenues have slipped off in its traditional North American and European markets, the company did make some inroads in taking its live events into Latin America and Asia Pacific, with revenues up in both geographies.

In the second quarter, performance fell below management expectations as trends weakened in the latter part of the quarter. continued softness in the economy played a part in the somewhat weaker results, while a recent changes in the talent base may have also impacted key operating metrics, particularly domestic pay-per-view buys and live event attendance.

There was also a once-off black swan to contend with: profitability was negatively affected by the reduction in revenue from high margin businesses and by the logistical costs related to the Icelandic volcano.

Say what you like about WWE (WWE). Its brand is strong and globally recognized and it is very hard to turn down a stock offering a dividend yield of 10%. Potential expansion into China looms which could boost the sustainability of dividends for years to come.