World Wrestling Entertainment, Frontline: High Yield Dividend Payers

In these turbulent times, it's hard to find safe places to invest. Many people are watching their 401k funds shrink before their eyes, particularly if they held any significant portion of their accounts in finance sector investments. Meanwhile, there are some stocks that are quietly paying dividends as usual. There's nothing like sending cash to each investor every three months to buoy confidence in a company's stock.

That's exactly what World Wrestling Entertainment Inc. (NYSE: WWE) is doing. The company issued a statement on Monday that it "feels confident it can fund the dividend for the long term." The WWE press release cited its strong cash flow and healthy balance sheet.

So just how much cash does the WWE send its investors? At the current price, the dividend yield is 9.5%. That's an annual dividend of $1.44 per share on a stock which closed Tuesday at $15.46.

Of course, a sinking tide is going to pull all the boats down with it, but those companies that have strong cash generating positions and which opt to share that cash with the ownership of the company can make it much easier to ride out the ebb and flow of tough markets.

In fact, companies who maintain or increase their dividend payouts through periods when the stock price is getting hit will see their yields jump in proportion to the falling share price. This can make them among the most attractive issues during times of financial volatility. Of course, this only applies if the company's business operations are likely to be unaffected by whatever it is that ails the economy and causes these broad-based downturns. The Wrestling business, according to the WWE, doesn't look to be affected by the banking crisis, although one might see some amateur competition from Capitol Hill as the two parties wrangle over the economy. Other high-paying dividend companies can be more difficult to judge.

Take Frontline Shipping (NYSE: FRO), for example, this company closed on Tuesday at $48.07 per share. Long time shareholders have gotten used to enormous, but fluctuating dividend payments. On September 19^th, the company paid a quarterly dividend of $3.00 per share. Annualized that would equate to $12.00 a year, or a whopping 27% yield at Tuesday's closing price.

While the more typical payment has been in the neighborhood of $1.50 per share, that's still a yield of over 13%. Many long-term holders of Frontline have seen their entire purchase price returned in the form of Return of Capital and Dividend cash payments over the years.

However, many shipping industry analysts have been predicting a glut of new oil tankers showing up on the market and driving the rates Frontline can command for its vessels way down. Lower charter rates means less cash flow and by necessity, lower dividends if they are right. Buying a new oil tanker, however, requires a boatload of cash and credit, and with the coming credit squeeze, it's not clear that those who have contracted for all these new ships are going to have the wherewithal to finance them. Already there are a rising number of cancellations.

So that might spell opportunity for large established players, right? Well, maybe. A significant downturn in the global economy could restrict the growth of oil demand around the world. That would mean the existing oil tankers would have less business to divvy up between them.

In other words, the oil tanker business is far less easy to predict than, say, wrestling. While Frontline has a long history of incredible dividend payments, and has the higher yield, it is certainly in a much more complex business sector with a strong dependency on many global situations that are beyond the immediate control of the company's management. While they have shown in the past that they can react to those events well and continue paying dividends, there's no guarantee of that in the future.

So is a 27% or even a 13.5% yield very attractive in today's market?

You bet it is, but investors should spend the time and effort to study the business environment of high-yield companies to make sure they understand what they are buying into before they rush to shield their portfolios with dividend payers.

Disclosure: none

Comments

[Dividend Gr...:]

The funny part is that WWE pays out more per share than it earns.

seekingalpha.com/artic...

I recently analyzed NAT because it had more historical data available ( over 10 years) compared to FRO. It seems that if you could live with fluctuating dividends and your are ok getting a portion of capital returned, then a small position in tankers could make sense..

seekingalpha.com/artic...

2008 Oct 02 01:43 PM

[Ed O in PA:]

i have owned NAT\FRO for >10 years and have enjoyed nice div. and price appreciation. that said, i sold most of my positions in both......will buy them back soon.

2008 Oct 03 08:57 AM

[notsosmart:]

if the divs paid for your stock why worry.?(my case).until somebody figures a way to pave over the ocean this could be good for a while.tankers are also used for storage.if the yield drops from 26% to 13% are you going to be unhappy? i wasnt.if i could get 13% on all my stocks i would be content.by the way,the ceo of FRO gts no pay. only divs.

2008 Oct 03 12:41 PM

[FourBrane:]

I've held FRO for years and have no inclination to sell at any price. True, my shares are "free" since the steady dividends have paid back my entire purchase price, but that's not why I'm holding. I'm holding because time and time again I've seen John Fredrikson and his talented managers at Frontline pull profits out of a hat. These guys know more about making money in this business than anyone else in the world. Do your due diligence, folks. Read all FRO's news releases over the years and you'll be watching some masterful businessmen in action. Be sure to pay attention to alll the "extra" stuff they own (and which may get spun off to create more dividend bonanzas). I've never seen anything else like it.

2008 Oct 05 04:41 PM

[einstein p ...:]

FRO is money ---- Demand destruction isn't going to last long enough for demand to outstrip supply.

2008 Oct 05 07:04 PM

[unremitting:]

It's all about management of cash flow and staying away from credit. If FRO can continue to perform with a cash flow in these high seas, I'll continue to hold out my hand for the dividends.

2008 Oct 11 11:53 AM

[inclineto:]

Hello all u FRO'ers: You couldn't be more right. Come 2010 FRO may be the only shipper with a "Paid in full" "All in Service" "Fleet of Double Hullers" Which in 2010 will be the Rule. However, FRO is already there because thats all they have. In fact they are the only shipping co. with all dbl hull tankers. So good luck to all those who MUST comply 14 months from now. As was stated above, cancellations are up. No Cash, No Credit. TOOBAD No new tanker. It wouldn't surprise me if Fredrikson were to buy out some of the competition, or be looking real hard @ China & India for more new business. Their oil needs are increasing faster than the US's decreasing. (?) Does anyone know what the "date of Record" is for the FRO (5-1) stock split?

2008 Oct 21 01:44 AM

[nobailout:]

I haven't heard any wind blowing.....and where did you here of this split???????

2008 Oct 30 04:36 PM

[Big Jake 1:]

There is no current split.....yet.

The 5-1 split was authorized by shareholder vote at the last shareholder meeting. Management can now split the stock when such action is necessary.

2008 Nov 14 06:23 AM