CBS Typical of Holdings in This Market

CBS Class B (CBS/NYSE) shares were bought for the portfolio in February 2006 at $25.61. They closed today at $8.62. Nearly every stock is getting punished these days, and media stocks especially so.

CBS is a cheap stock, and may even deserve it, since it is thought of as a "boring old media company." I say it's cheap primarily because it yields more than 12% at current prices. The dividend looks stable and, while no shareholder could be content with the stock price performance, the shareholder payouts make waiting for the eventual recovery more bearable.

Andrew Bary wrote about CBS -- and Viacom and Sumner Redstone -- in Barron's Online on Monday:

The weaker CBS, which owns the CBS network, a group of CBS TV stations, as well as radio and billboard businesses, said Friday that it expects a "mid-teens" decline in 2008 operating income from 2007 levels. CBS is exposed to soft auto and local ad trends, as well as troubles in the radio industry. Cowen analyst Doug Creutz today upgraded CBS to Neutral from Underperform, writing in a client note that while he is "very cautious" on the company's business outlook, the company's juicy annual dividend of $1.08 "is safe for the foreseeable future."

CBS is obviously a much better buy at current prices than when I bought it 2-1/2 years ago. But you can say that about just about everything.

Comments

[Marc O'sullivan]

Thanks for the post.
Big day to John McCain, David Letterman and CBS today.

[Alex]

Despite the internet adspace, I expect CBS to remain a cash bonanza, albeit with a decline over the next few years. But I would like the management to prepare the balance sheet for a multi-year slog, and to also start funding the pension liability.

[Thomas]

Does the dividend still look stable if I tell you that we're on the front-end of an advertising recession?

[John]

Marc: I don't know how much any candidate showing up on Letterman means to the stock price. But Letterman is probably more important than Katie Couric.

Alex: One thing holding CBS back is the amount of intangibles on its balance sheet. Les Moonves has been committed to returning cash to shareholders, boosting the dividend more than once. But an extended economic downturn could certainly change things.

Thomas: That depends on how long and steep the ad recession (depression?) is. The dividend looks stable now, but now is just a snapshot in time.