Telecommunication and cable companies are good bets for investors because of their growth potential and dividend payments. While I have talked about the great dividends being paid by AT&T (T) and Verizon (VZ) many times in the past; there are some other companies that are good values in the space. Investors searching for cheap stocks in the cable and media industry should take a look at these two cheap stocks in this space.
Class A shares of Comcast Corporation (CMCSA) are starting to look cheap again. Shares currently trade at $20 a share and would be a real value in the teens. The stock trades at 1.2 times book value, 1.3 times sales, and 4.5 times cash flow. Shares currently trade at 13 times earnings and just 0.8 times earnings growth.
Comcast generates a substantial amount of cash flow increasing its operational cash flow from $10.2 billion dollars to $11.1 billion dollars in three years. Comcast has been able to achieve 22% annual growth over the past five years and is on pace for 26% annual growth this year. Net income was up over 15.6% last quarter.
Comcast has a decent 45 cent dividend which equates to a 2.1% yield. This is a steady reliable company that is only seeing its growth prospects increase in the coming years.
Time Warner Cable
Time Warner Cable (TWC) is a reasonable investment for a different reason. The company is becoming one of the better cable company dividend stocks. Time Warner Cable currently has a 3% dividend yield due to its $1.92 per share dividend payment. Time Warner Cable increased its dividend earlier in the year.
Shares trade at 0.9 times earning growth, 1.1 times sales, and 4 times free cash flow. The stock is not cheap in relation to book value as it trades at 2.5 times the stated value. Time Warner Cable has a great management team that has been able to take modest top line growth in the 4 to 5% range and turn that into 20% earnings per share growth.
Time Warner Cable has been able to expand its subscriber base with smart acquisitions like the Insight Communications deal announced last month. The company is able to utilize the core synergies that come with its acquisitions and create a leaner more efficient business. Time Warner Cable believes that the $3 billion dollar deal could result in $100 million dollars in annual savings.
Both of these companies have been resilient despite the poor performance of the market in recent weeks. Comcast Corporation has risen 13.73% this year and Time Warner Cable is up 12.8% year to date.