Key Risks
Advertising revenue drives over half of Meredith’s total sales each year and is rather cyclical depending on political seasons and the overall health of the economy.
Spending will ebb and flow but shouldn’t impact Meredith’s long-term earnings power. However, the shift from traditional to digital advertising could.
Meredith’s Local Media publishing business generated about 75% of its advertising revenue from print sources last year.
While the company achieved 3% growth in print advertising spending last year, it could struggle to continue expanding. Growth in digital could more than offset any declines in print advertising, but it remains a risk for the publishing business (and Meredith’s overall growth).
Another risk factor to be aware of is retransmission fees, which I estimate to account for close to 10% of Meredith’s company-wide sales but a much higher percentage of profits.
Industry retransmission fees surged 20% last year and have skyrocketed over the last five years.
While growth is still projected in retransmission fees over the next five years, pay-TV subscriber losses are putting increased pressure on the price of cable.
As a result, there could be some pushback on retransmission fees (2) – no one knows.
Meredith is one of the smaller TV station operators. Since it lacks the scale enjoyed by many of its peers, its bargaining power with cable companies is presumably less when it comes to fee negotiations.
Meredith Corporation (NYSE:MDP) would almost certainly like to gain scale in this business, and it wouldn’t surprise me if management pursued a meaningful acquisition. This could create risk for the company but might also be necessary for its long-term future.
Dividend Safety Analysis: Meredith
We analyze 25+ years of dividend data and 10+ years of fundamental data to understand the safety and growth prospects of a dividend. Meredith’s dividend and fundamental data charts can all be seen by clicking here.
Our Dividend Safety Score answers the question, “Is the current dividend payment safe?” We look at factors such as current and historical EPS and FCF payout ratios, debt levels, free cash flow generation, industry cyclicality, ROIC trends, and more.
Dividend Safety Scores range from 0 to 100, and conservative dividend investors should stick with firms that score at least 60. Since tracking the data, companies cutting their dividends had an average Dividend Safety Score below 20 at the time of their dividend reduction announcements.
We wrote a detailed analysis reviewing how Dividend Safety Scores are calculated, what their track record has been, and how to use them for your portfolio here (3).
Meredith’s Dividend Safety Score is 84, which indicates that its current dividend payment is very safe.
