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Summary

  • SBGI recently announced Q2 EPS of $0.42/share which beat Street estimates by $0.05/share, and revenue of $455.13 million beat estimates by a margin of $14.47 million.
  • SBGI also announced it would be increasing its quarterly dividend by 10%, from $0.15/share to $0.165/share.
  • Recent trend behavior could improve well into the second half of the year, especially if SBGI can continue demonstrating increases in its net broadcasting revenues over the next 6-12 months.

On Wednesday, August 6, Sinclair Broadcast Group (NASDAQ:SBGI) not only reported the results of what I believe to be a very strong second quarter but also raised its dividend 10%. In the wake of the company's impressive first quarter and most recent dividend hike, I wanted to examine several reasons behind my decision to consider a long-term position in this broadcasting play.

Company Overview

Headquartered in Hunt Valley, Maryland, Sinclair Broadcast Group, Inc. is one of the largest and most diversified television broadcasting companies in the country today. Sinclair owns and operates, programs or provides sales services to 162 television stations in 78 markets, after pending transactions. Sinclair's television group reaches approximately 38.9% of U.S. television households and includes FOX, ABC, MyTV, CW, CBS, NBC, Univision and Azteca affiliates.

Recent Trend Behavior

On Thursday, shares of SBGI, which currently possess a market cap of $3.13 billion, a forward P/E ratio of 18.14, and a dividend yield of 2.05% ($0.66), settled at a price of $32.15/share. Based on a closing price of $32.15/share, shares of SBGI are trading 3.31% below their 20-day simple moving average, 0.93% below their 50-day simple moving average, and 4.46% above their 200-day simple moving average.

Although these numbers indicate a short-term downtrend and a long-term uptrend for the stock, which would normally translate into a selling mode for near-term traders and a buying mode for long-term investors, I strongly believe the company's recent earnings performance could be the first step in enhancing its recent trend behavior.

Second Quarter Earnings

On Wednesday, August 6, Sinclair Broadcasting reported the results of a very solid second quarter. Analysts had been expecting the company to earn $0.37/share on revenue of $440.66 million; however, RRC impressed both investors and analysts when the company reported earnings of $0.42/share on revenue of $455.13 million.

One of the more notable factors behind SBGI's impressive quarterly earnings performance was clearly its broadcast revenues. Local net broadcast revenues, which include local time sales, retransmission revenues, and other broadcast revenues, were up 47.0% versus the second quarter of 2013, while national net broadcast revenues, which include national time sales and other national broadcast revenues, were up 36.3% versus the second quarter of 2013.

If the company can continue to demonstrate increases in both its local net broadcast revenues and its national net broadcast revenues, there's a very good chance full year earnings estimates will be surpassed.

Recent Dividend Behavior

Also on Wednesday, August 6, Sinclair Broadcasting announced a quarterly dividend increase of $0.015/share, which brings its upcoming dividend payout to $0.165/share. It should be noted that the increase will be paid on September 15 for shareholders of record as of August 29.

This boost represents a 10% increase from its prior dividend of $0.15/share, which was paid to investors on June 13. As long as the company can continue to gradually enhance its cash position (which stood at $395.5 million on 6/30/14), there's more of a chance investors may see annualized dividend increases versus the company's recent dividend behavior which has demonstrated only two increases since February 2011.

Conclusion

For those of you who may be considering a position in Sinclair Broadcasting, I strongly recommend keeping a close eye on the company's recent dividend behavior, which has demonstrated a solid uptrend over the last five years, and its ability to continue to demonstrate in its broadcast-based revenues, as each of these catalysts will play a role in the company's long-term growth.

Source: Several Reasons I'm Staying Bullish On Shares Of Sinclair Broadcasting