Comcast Comes Out Swinging

2/15/2008 7:00 PM Eastern

After taking hits from some vocal shareholders in recent months, criticizing its management and its business prospects, Comcast took the offensive last Thursday morning. The nation’s largest cable operator unveiled a plan that involves significantly increasing its share-buyback program and issuing a cash dividend to shareholders for the first time in nearly 10 years.

Comcast: By the Numbers
Comparing 2007 to 2006 at the No. 1 U.S. cable operator:
2007 2006
SOURCE: Company reports
Subscriber Gains (Losses)(180,000)80,000
Average Revenue Per Sub$104.77$95.34
Revenue$30.9 billion$24.96 billion
Operating Cash Flow$11.8 billion$9.4 billion
Net Income$2.6 billion$2.5 billion
Earnings Per Share$0.83$0.79
Shares Outstanding3.06 billion3.12 billion

Comcast said that it will issue a 6.25 cents-per-share quarterly dividend to qualified shareholders beginning in April. The annual dividend will be 25 cents per share.

“We expect the dividend will increase over time,” said chairman and CEO Brian Roberts on a conference call with analysts.

Comcast last issued a quarterly dividend in March 1999 of 2 cents per share.

In addition to the cash payout, Comcast said it will spend $6.9 billion by the end of 2009 to repurchase shares, with half of that being spent to buy back stock this year. Comcast repurchased about $3.1 billion of its own stock in 2007, $1.25 billion in the fourth quarter.

Overall, Comcast said the plan would return $750 million to shareholders annually, representing about one-third of its $2.3 billion in free cash flow in 2007.

News of the dividend and buyback sent Comcast shares soaring. The stock, down 35.8% in 2007, climbed as high as $19.31 per share (up $1.50 each) last Thursday before closing at $19.24 per share (up 8% or $1.43 each).

While some analysts had hoped that the dividend would be bigger — some expected a cash payout representing a 3.5% yield, or more than double the 1.4% yield of the announced dividend — but the accelerated share buyback should more than make up for that difference.

In a research note, Sanford Bernstein cable and satellite analyst Craig Moffett estimated the dividend and share repurchase program combined represented an 8% yield.

“Investors were hoping … even expecting … a dividend,” Moffett wrote. “What they got is likely better.”

While the stock was buoyed by the possibility of greater shareholder returns, Comcast reported mixed fourth-quarter results. The Philadelphia-based multiple-system operator exceeded some analysts’ expectations for revenue and cash-flow growth, but lost 94,000 basic video customers in the period.

Burke said Comcast is addressing customer losses head-on — it is “significantly” increasing its marketing in 2008, continuing its rollout of a lower-tiered high-speed data service and deploying switched digital services to 20% of the areas it serves by the end of the year.

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