Paramount Global (PARA) is a massive company within the entertainment industry, not to mention deep in streaming. Paramount is going up against the goliaths of Netflix (NFLX) and Disney (DIS), when it comes to the streaming wars, as well as Apple (AAPL). However, Paramount has OVER 60 million subscribers, and that mass of streaming is only growing.
THEN… as we know – Top Gun’s latest box office smash hit is KILLING it in theaters, raking in over $800 million globally, already. On the flipside, the stock has gotten CRUSHED. Is it time to buy this stock now?
Paramount Global (PARA) – The Company
When I talk about Paramount being a global, massive company, I am not messing around. Their portfolio of brands includes the likes of Nickelodeon, MTV, Comedy Cenetral, Paramount theatrical productions, the Pluto network and many, many more.
What does that mean? The number of eyeballs that they can grab on their screen time is deep. To which, majority of their revenue comes from TV/Media in the form of advertising, of course. However, streaming or direct-to-consumer (DTC) is up over 80%, with first quarter revenue crossing $1 billion in revenue. INSANE!
In addition, the theatrical movies are really starting to pick-up. First up – Top Gun’s Maverick. This movie that was released a few weeks ago, has spread like wild fire, bringing in over $800 million globally! Smashing many records for the timing of this movie’s release. Earlier, Sonic the Hedgehog 2 earned approximately $400 million at the box office globally. Beyond these two, Paramount also has Transformers, Mission Impossible, TMNT, A Quiet Place Part 3 and many others in the pipeline. The future looks bright there.
How did Paramount get so massive? Well, Viacom and CBS merged a few years ago, to form ViacomCBS, which they then changed their global name recently.
How is Paramount looking on the revenue train? They earned over $7 billion in quarter 1, with TV Media declining by $350 million but DTC increasing $500 million. Therefore, Paramount is really increasing the other lever, when one goes down. Filmed entertainment was down around $170-$180 million, but I am sure Top Gun’s Maverick is going to add a JOLT in Q2.
How is DTC increasing so much? Subscriber growth for Paramount+ is now over 60 million subscribers, increasing over 6 million in Q1 and Pluto is now at 68 million active monthly users.
Lastly, Paramount had over $5 billion of cash on the balance sheet and repaid $2B of notes. Here is what the stock price has done so far in 2022… yikes:
Paramount Global dividend stock analysis
I cannot wait to put Paramount stock through the Dividend Diplomat Stock Screener! Here, we focus on 3 main dividend stock metrics:
1.) Price to Earnings Ratio (P/E): We look for the price to earnings ratio < the S&P 500 and the competition.
2.) Dividend Payout Ratio: The preferred dividend payout ratio is < 60%. In fact, we believe the perfect payout ratio is between 40% and 60%.
3.) Dividend Growth Rate: Given we are dividend investing on our way to financial freedom, as we believe dividend income is the best source of passive income, we look at the 5 year dividend growth rate. In addition, we review how many years the company has increased their dividend.
1.) P/E Ratio: Paramount Stock is looking really cheap right now, with a price to earnings below 10x, at 9.45. The S&P 500 is approximately 19 and this shows slight signs of undervaluation in the market. Doesn’t hurt that the stock is down almost 40% in the last 52 weeks.
2.) Dividend Payout Ratio: A dividend payout ratio that helps you sleep at night. Paramount’s ratio is just a tad below 37%, which shows they not only have ample room to pay and increase their dividend, if they so desire, but also a significant amount of net income to reinvest back into the business. A company like Paramount has to do that to keep up with the Streaming Wars.
3.) Dividend Growth Rate: Now, this is interesting because Paramount Stock has only been trading for a very short time, due to the change and change in ticker symbol. Viacom / CBS typically only increased their dividend (in a huge way) once every 3-5 years. Therefore, the last true increase was around 20% and you could then anticipate that in every 5-7 years, the dividend grows by 30-40%, or an average rate of 6.5%-8.5%. It’s about time for an increase, I believe, as well.
Lastly, we’ll take a look at the dividend yield. As an investor, you want to know how much owning this dividend stock pays you now! The yield for PARA is 3.91%. That is higher than the S&P 500 by approximately 240 basis points. Therefore, the yield in Paramount stock is more than double and close to triple the S&P 500, definitely getting paid to hold.
is Paramount Stock a Stock to buy now?
Now that we’ve gone through the metrics, is PARA a stock to buy for the dividend stock portfolio?
At this time, I am a buyer at these price levels. I would argue that you should be buying quality in this bear market and that – with recessionary pressures looming – you should be buying, though, higher quality dividend aristocrats and ETFs. However, I’d like to build my position to 175 shares, which I am at 170 now. Therefore, another 5 shares is only $130 at these price levels, not too much of a financial commitment.
If you head over to our YouTube channel, you’ll find other undervalued dividend growth stocks that are higher on my list for stocks to buy now!
How about you? Do you own Paramount stock? Do you think PARA is a stock to buy now in this significantly volatile stock market? Share your comments and feedback below!
As always, thanks for stopping by, good luck and happy investing!
-Lanny