Cable companies Comcast Corp. (CMCSA) and Time Warner Cable (TWC) are expected to grow more quickly and increase their dividends faster than wireless carriers AT&T (T) and Verizon Communications (VZ), according to Philip Cusick, Managing Director at J.P. Morgan.
“Comcast, Time Warner Cable declared dividends in the last few years in the range of 1.5% to 2.5% apiece, but we expect those dividends to grow by 20% to 30% next year versus AT&T and Verizon that grow their dividend by 3% or 4%,” Cusick said.
Cusick uses free cash flow per share as one of the important metrics to value cable companies. He says that, although CMCSA and TWC are yielding in the range of 7% to 8% free cash flow yields on 2013 numbers, and that may seem expensive, these names are still attractive relative to VZ and T.
“The cable companies are doing pretty substantial buybacks, buying back their own stock. So the capital return from Comcast and Time Warner Cable is comparable to where Verizon and AT&T are, and yet they grow more quickly and they have more free cash flow generation potential than T or Verizon,” Cusick said.
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