Time Warner Cable Inc., the second- largest U.S. cable-television operator, boosted its quarterly dividend 20 percent and posted a profit that beat analysts’ estimates by adding customers and selling pricier products.
Fourth-quarter net income rose to $392 million, or $1.09 a share, from $322 million, or 91 cents, a year earlier, the New York-based company said in a statement today. That beat the $361 million average analyst estimate in a Bloomberg survey. The company will pay a dividend of 48 cents a share, compared with 40 cents a year before.
Chief Executive Officer Glenn Britt has worked to reduce spending while encouraging subscribers to buy more products by bundling Internet, phone and cable television. Those efforts have boosted free full-year cash flow by 19 percent to $2.3 billion. Throughout last year Britt signaled that when the company’s debt was paid down to a 3.25 ratio, the company would use its cash to reward shareholders.
“Time Warner Cable reported largely positive results and increased its dividend by 20 percent,” said Tom Eagan, an analyst at Collins Stewart LLC in New York. “This translates to a 2.8 percent dividend yield at current trading levels, the highest among non-telco pay-TV providers.” Eagan ranks the shares as a “buy.”
Time Warner Cable rose $1.17, or 1.7 percent, to $69.25 at 4 p.m. in New York Stock Exchange composite trading. The shares gained 60 percent last year.
In the fourth quarter, the company repurchased 8 million shares for $515 million. Time Warner Cable appears to be on track to complete its entire $4 billion buyback this year, said Marci Ryvicker, an analyst with Wells Fargo Securities in New York. In November, the cable operator announced the buyback program without giving any specific timeframe in which they would repurchase the shares.
“Anticipation of further capital returns will be more catalyst-provoking than actual results, given that management has already hinted to better subscriber trends versus prior quarters,” said Ryvicker, who ranks the stock as “outperform.”
Time Warner Cable anticipates earnings per share of as much as $4.50 this year, Rob Marcus, Time Warner Cable’s chief financial officer, said on the company’s conference call today. Analysts on average expect $4.46 a share, according to a Bloomberg survey. The company also predicts double-digit operating profit and free cash flow growth, with capital spending less than $3 billion this year, Marcus said.
Fourth-quarter sales advanced 5.9 percent to $4.8 billion on voice and Internet subscriber additions. The company continued to lose basic television subscribers. Pay-TV customers have declined amid a sluggish economy and as cheaper programming alternatives emerge online.
Time Warner Cable’s quarterly subscription revenue rose 4.6 percent, to $4.5 billion, boosted by sales of more-expensive products like video digital recorders. The company added 25,000 customers combined for Internet, video and phone services in the fourth quarter. Phone and Internet subscriber gains offset a loss of 141,000 video subscribers. Ryvicker had predicted a gain of 36,000 Internet, phone and TV subscribers combined.
((Time Warner Cable held a conference call today to discuss results. To listen to a replay go to http://www.timewarnercable.com/investors.))
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