Investors continue to ignore that massive buyback program undertaken by DirecTV (DTV) in favor of other cable and communications providers. In fact, this $31B market cap company used $1.1B to return capital to shareholder in the form of buybacks in Q4'11 alone. Now it has announced a new $6B buyback program that amounts to 20% of the outstanding stock.
Investors are clearly enamored with dividends so much that they've clamored to cable companies and wireless providers that have higher dividend yields than DirecTV. Sure those yields are nice and far exceed treasuries, but why ignore the nearly 20% yield being offered by DirecTV?
Amongst the comparable domestic mega cap companies of AT&T (NYSE:T), Comcast (NASDAQ:CMCSA), Time Warner Cable (TWC), and Verizon Communications (NYSE:VZ), DirecTV has by far the highest percentage of market value returned to shareholders.
Below is a summary of the debt load, growth rates, and yields of those mega cap companies:
|5 Yr Growth Rate||18.7%||3.7%||13.8%||13.7%||11.9%|
|Net Payout Yield||17.0%||5.9%||3.8%||13.9%||5.2%|
The above ratios are just some of the many that can be used to compare stocks. Many investors use debt/equity or a version of Enterprise Value to estimate a companies worth that factors in debt loads.
From the above statistics, it appears clear that DirecTV not only offers the highest growth rates, but it also trades at the lowest valuations. Combined with a reasonable debt load compared to the group, it seems like the most compelling stock to own right now.
I guess if an investor only wanted a high dividend yield one might chose AT&T or Verizon. Otherwise why not go with the company growing the fastest and returning the highest level of capital to investors?
Disclosure: I am long DTV.
Additional disclosure: All data sourced from Yahoo! Finance. Please consult your financial advisor before making any investment decisions.