On Friday, entertainment company World Wrestling Entertainment Inc. (NYSE:WWE) declared a quarterly dividend of 24 cents per share on all Class A and Class B common stock. The dividend will be paid on Sept. 26 to shareholders of record on Sept. 14.
Wrestling might be fake, but you can’t fake a dividend that has doubled over the past 3 years. WWE has grown its dividend rate from $0.04 to $0.24 per quarter over the past 4 years. The current dividend yield on shares of WWE is now a whopping 6.70%. However, the diluted earnings per share are $0.63, giving WWE a dividend payout ratio of well over 100%, which is not sustainable.
Is The WWE On The Ropes?
If you’ve ever questioned the actual entertainment value of professional wrestling, take a look at the following numbers:
The Finishing Move
WWE’s “Monday Night RAW” on USA delivered 5,266,000 viewers on August 6, its best rating in the third quarter and a 10 percent increase over its quarter-to-date average. After the recent murder-suicide of pro wrestling star Chris Benoit and another box-office disaster with Steve Austin’s “The Condemned," the share price of WWE has tumbled. Could this possibly present a buying opportunity? With WWE’s Summer Slam, the largest pay-per-view event of the season, just around the corner on August 26, investors may be enticed to take a position in WWE stock with hopes of a turnaround after the share price as been beaten down by recent events.
Despite the negative press from the Benoit scandal and the disastrous performance of WWE’s movies at the box office, the overall financial performance of the company is improving. If management decided to cut its losses, get out of the major film production business and to focus on its core activities, WWE just might be able to turn things around for good.
Disclosure: I do not own shares of WWE.