Time Warner Cable 's (
) stock and dividend growth has held up well even as rising
programming costs threaten to squeeze profits.
The No. 2 cable TV operator behindComcast (
) has increased its dividend steadily since regular quarterly
payouts began in 2010. The latest increase was declared in
January, a 16% hike to 65 cents a share. The annual dividend of
$2.60 per share is good for a yield of 2.3% at the current share
price, just shy of the S&P 500 average of 2.5%.
Meanwhile, the stock is up 15% so far this year, also just
below the S&P's 18% increase. The stock has formed a
cup-with-handle base with a 116.10 buy point. However, the handle
is in the lower half of the pattern and the stock's Relative
Strength line has been going sideways, which doesn't bode
Time Warner Cable has been buoyed by reports thatLiberty Media
), the biggest investor in Cable TV operatorCharter
), has approached the company about a merger.
A tie-up could help Time Warner Cable gain leverage in talks
with content providers such asCBS (
), which recently cut off programming to the cable TV operator in
a dispute over retransmission fees. CBS restored programming last
month after winning a big fee increase.
Nevertheless, Time Warner Cable's profit is expected to rise
16% in Q3 from a year earlier to $1.64 a share. That would mark
the second-straight quarter of earnings acceleration. Revenue is
expected to edge up 3%.
Time Warner Cable's three-year Earnings Stability Factor is 2
on a scale of 0 (most stable) to 99 (least stable). Also,
operating cash flow rose to $17 a share in 2012, nearly triple
the earnings per share that year. Stable profits and strong cash
flow bode well for continued dividend growth.
But the company's long-term debt-to-equity ratio is very high
at 346%, making the company vulnerable to any rise in interest