Comcast: Buy For Dividend Growth

8/13/17

In spite of the fact that shares of Comcast Corp (CMCSA) are up about 21% over the past twelve months, there’s still upside in the stock in my view. The fact that the shares still trade at a discount to the overall market is a sign that there’s more gains ahead. I’ll outline my reasoning below by reviewing some of the financial highlights over the past seven years, along with a prediction of what I consider a reasonably conservative return expectation over the next few years. I’ll conclude by talking about the stock and how investors are required to access the future cash flows of a business via the public markets that sometimes price assets at odds to their innate value.

Financial Snapshot

The first thing that leaps off the page when reviewing the last seven years of financial history at Comcast is the fact that it’s a growth company. For instance, revenue has grown every year, and has, since 2010, achieved a CAGR of about 11%. While net income hasn’t grown as consistently (it dropped one year), it has grown at a CAGR of about 13%, suggesting that this is a relatively scalable business. Finally, as a result of a relatively aggressive share buyback program, EPS has grown every year at a compound growth rate of about 15.6%. This is obviously a growth company, and anyone who fails to acknowledge that fact seems to me to be engaging in a kind of willful blindness.

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