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New Frontier Media (NOOF): adult pay-per-view company yields high dividends
Topics: dividends, noofI’ve had my eye on New Frontier Media (NOOF) all year, and its not the scantily-clad women in its videos that caught my attention. Its the fat dividend yield. According to Yahoo!, New Frontier currently yields over 10%. As mentioned earlier, NOOF’s second quarter earnings (ending 9/30/07) disappointed. Third quarter earnings were down slightly as well ($3.1M or $.13 per share versus $3.4M or $.14 per share), but according to NOOF’s conference call, third quarter revenue of $17.9M was “the highest quarterly revenue achieved in the company’s history.” New Frontier management sounded very optimistic going forward:
We believe that this quarter’s year-over-year decline in pay-per-view revenue will be the last one connected with that re-rate, and that starting next quarter we should again resume a year-over-year growth trend in that business.
That trend will be assisted by a number of factors. Key among these is the launch of a third channel on the nation’s largest DBS platform. This launch has materially improved our revenue performance on this platform. We expect these results to improve further over the coming months as we optimize our line-up on this platform with even stronger performing services.
On VOD, New Frontier continues to be the performance leader. On the systems we are able to track via third party research, our services outperform our nearest competition by at least 25% on a revenue per server hour basis.
(transcript courtesy of Seeking Alpha).
Technically, the weekly chart looks like NOOF has stabilized and is putting in a bottom. I bought NOOF Wednesday at $4.60. With continued profitability, I like the odds that the stock will turn around. The 10+% dividend pays shareholders richly to wait for the reversal, so I don’t mind being a bit early.
UPDATE 4/5/08: For an extremely well-reasoned counterpoint, please read the series on NOOF at Off The Beaten Path.
DISCLOSURE: Long NOOF.
looks like we disagree about NOOF’s prospects. I hope you have a more profitable experience with the stock than I did
I actually agree with most of your reasoning, but only depart with your final assessment of the risk-reward at the current price. At any rate I think your articles are an important counterpoint and have put a direct link in the post above.
If NOOF underperforms, it will probably be due to the headwinds you have identified. However, I think there is a pretty good chance that those headwinds are already priced into the stock, as the basing pattern implies. Given the dividend I’m willing to take that chance.
With a payout ratio over 100%, are you certain that they can keep that level of distribution going????
@Adam: of course I am not certain. As with any stock I own, if the situation changes I’ll happily kick it to the curb.
MS - Any current thoughts on NOOF? Where do you see the target for this one?
@Alex: I don’t have a target. For NOOF I’d be happy with a decent rise and continued dividends. This one probably won’t double and that’s fine with me.