By Jeff Bailey
Spending more than one makes is as American as, well, as subprime mortgages, but sooner or later it will catch up with you.
World Wrestling Entertainment’s (WWE) dividend payout in recent years has exceeded its net income:
Year————————-Dividends Paid————————Total Net Income
2010(9 months)———$62.6 million—————————-$45.3 million
2009————————-$82.3 million—————————-$50.3 million
2008————————-$81.4 million—————————-$45.4 million
2007————————-$68.7 million—————————-$52.1 million
WWE even discusses, in the risk factors portion of its 10-K filing, potential tax implications for its holders because of the company’s habit of paying out more than it earns (which can reduce a stockholder’s cost basis for tax purposes; ouch).
It’s an odd state of affairs because, in some other respects, WWE is an attractive stock. WWE has a nice cash cushion.
Though revenue is currently stagnant, down 1% to $355.1 million for the nine months ended September 30, profit is up 16% to $45.3 million for that period, or 60 cents a diluted share, on cost containment and some movie production tax credits received.
Plus, Vince McMahon — the CEO has been compared to B.T. Barnum, turning thick-necked actors into loved-and-hated cartoon characters — seems to have a flair for pricing. Even as WWE had to cut back the number of its North American live shows 8% to 195 during the first nine months of 2010 – and still suffered a small decline in average attendance, to 6,400 – McMahon jacked up the average ticket price by more than $1 to $39.50. Overseas, he got $66.69 per ticket, almost three bucks better than a year earlier.
The shows brought in an average gate of about $320,000 each; more than a bake sale, less than an AC/DC concert.
And despite what McMahon’s dirty tricks in and around the ring (see Montreal Screwjob), as the fictional bad guy “Mr. McMahon,” he puts fellow shareholders first when it comes to dividends. McMahon owns about 59% of WWE’s shares, but takes just 24 cents in quarterly dividend on each, while non-McMahon holders get 36 cents. It works out to about $42 million a year for each group.
The stock has roughly equaled the performance of the S&P 500 over the past five years, which is to say it has gone nowhere.
And, as Barron’s noted last fall, WWE faces tough competition from the Ultimate Fighting Championship to draw blood-thirsty fans. The economy hasn’t helped, either, and McMahon hopes a rising tide will lift his leaky boat. And it probably will.
We’re dividend junkies here at YCharts (you can scroll through lush payouts of all sorts here; click on the stock symbol to investigate the company’s fundamentals), but in this odd case it seems a dividend cut would demonstrate financial sanity and make one more inclined to want to invest with McMahon.
Disclosure: No position