Cable, satellite TV giants rolling in cash: report

Thanks to TV-watchers' willingness to pay more for cable or satellite service (even as companies' capital spending falls), and investors' insistence on sharing the wealth with companies whose profits are rising faster than share prices, "suddenly, the Pay TV companies are falling over themselves to return cash to shareholders. It’s about time," writes Craig Moffett of Bernstein Research in a report to clients today.

"DirecTV, Time Warner Cable, and Cablevision are leading the charge. Time Warner Cable's dividend, at 3.5% yield, is
now the industry's highest... DirecTV announced a plan to buy back $3.5B of stock this year alone... Cablevision – which reported truly spectacular free cash flow results yesterday – has spun off (Madison Square Garden)... and has hinted to shareholders" that it will finally pay down its crushing debtload."

Not everyone's sharing, however. "By contrast, Comcast committed its cash to buying NBCU," while Dish Network "ha(s)n't promised to do anything... Investors, justifiably, want to know how and when they will get paid... Since news of Comcast's NBCU announcement, Time Warner Cable has outperformed Comcast" by more than 10 percent. "If one were to assume that Comcast's stock would otherwise have matched TWC's... then Comcast's decision to acquire NBCU has arguably cost their shareholders $5.2B" in lower share value.

Moffett recommends Time Warner shares over its rivals' because it "has a clear view on how all (its) cash will be used for creating shareholder value." He didn't say which TV company delivers the best value for consumers.