Seeking Alpha
Profile| Send Message|
( followers)

Meredith Corporation (NYSE:MDP) is a media and marketing company that engages in magazine publishing and related brand licensing, television broadcasting, integrated marketing, interactive media, and video production businesses in the United States. Its more popular print publications include Better Homes and Gardens, Family Circle, and Ladies' Home Journal. It also owns 12 network-affiliated television stations and 30 websites, among other assets.

Dividend Reliability A stock's dividend reliability is determined by its dividend payment history as well as its current financial health. Total of four points available.

  • The number of Consecutive Dividend Payments -10 to 25 Years = 1 Point; More than 25 Years = 2 Points
  • Cash Flow Payout Ratio - Less than 60% = 1 Point
  • Debt to Total Capital - Less than 45 % = 1 Point

Dividend Growth A company needs to be growing its dividend on an annual basis. The growth of its dividend should be at a respectable rate, and the free cashflow payout ratio should not be increasing over time. Total of four points available.

  • Number of Consecutive Dividend Increases - 10 to 25 Years = 1 Point; More than 25 Years = 2 Points
  • 1 Year Cash Flow Payout Ratio vs Avg 5 Year - 1 year cash flow ratio <= Avg 5 year = 1 Point
  • 1 Year Dividend Growth Rate vs Avg 5 Year -1 year dividend growth rate > Avg 5 year = 1 Point

Fair Value If we're going to buy a stock, we don't want to purchase it went its overvalued. Total of 2 points available

  • Current P/E vs Avg 5 Year P/E - Current P/E < Avg 5 Year P/E = 1 Point
  • PEG Ratio - PEG < 1.5 = 1 Point

Factor

What we want

Actual

Points

Dividend Reliability

Consecutive dividend's paid > 10 years

27 years

2

Cash flow payout ratio < 60%

34%

1

Debt to total capital < 45%

15%

1

Dividend Growth

Consecutive dividend raises > 10 years

18 years

1

1 yr cash flow payout less than or equal to Avg 5 yr cash flow payout

34% > 25%

0

1 yr dividend growth rate greater than or equal to Avg 5 yr dividend growth

33% > 16%

1

Fair Value

Current P/E < Avg 5 year P/E

12.6 > 6.8

0

PEG ratio < 1.5

1.8

0

Total Score

6/10

Strengths - MDP's more popular publications (Better Homes and Gardens, Family Circle, and Ladies' Home Journal) provide strong brand recognition. They have a loyal customer base and are a market share leader. They have made an adjustment to online media and marketing unlike other print media companies.

Weaknesses - MDP operates in a highly competitive environment and lacks an economic moat. The company needs to expand to a wider market.

Opportunities - Continued online growth through innovation and acquisition. Emerging markets and expansion abroad also present growth opportunities.

Threats - Declining print magazine subscriptions need to be replaced with online revenue. Rises in paper and shipping costs could eat into the company's margins. They compete in highly competitive market and must continue to innovate to stay ahead.

Conclusion - MDP scored 4 points in dividend reliability, 2 points in dividend growth, and 0 points in fair value for a final score of 6/10 points which rates it as a Hold, revisit within a year.

MDP's last dividend increase got my attention. I didn't know much of the company before then, but I've come to find out it has been a solid dividend growth stock for many years. The current yield of 4.7%, low dividend cash flow payout ratio, and low debt to total capital makes it an appealing choice for my dividend growth portfolio. I would prefer for the share price to come down before accumulating though. I will be keeping MDP on my watch list and may initiate a position in the future on dips in the share price.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Meredith Corp. Dividend Growth Stock Analysis