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MMA May Take a Bite out of Wrestling Stock: Analysts Are Down on WWE

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There is much to recommend WWE stock.  The company, by all accounts, is very healthy and profitable.  But the Motley Fool thinks the ship has sailed on the WWE.  Part of the reason?  A departure of fans for the hipper and edgier UFC.  It may be some time, however, before investors realize that the WWE is yesterday's news.  And even then, it may not matter.

 

Income investors may not care. They're attracted to the fat 6.7% yield, given the quarterly dividends of $0.24 a share. But are they aware that the company is paying out more than it's earning? Analysts see WWE posting a profit of $0.67 a share this year and $0.75 a share next year. In the company's defense, it has a cash-rich balance sheet and healthy cash flow. However, if the over-the-top storylines and incendiary personalities have truly been worn thin, whom is Wall Street kidding with its projections of a turnaround in 2010? Analysts have overestimated WWE's earnings potential in two of the past four quarters, and they appear to be doing it again.

As long as the WWE is paying out huge dividends (and they will, as the McMahons pocket that cash) there will always be a market for the WWE stock.   Still, when the financial press is talking about your inablity to make stars, it may be time to invest in your developmental system.