Updated on September 28th, 2021 by Bob Ciura
The entertainment industry is notoriously volatile. What was popular last year or today, may not command the same attention in a year or a decade. It is a constantly transforming industry.
As such, it’s important for entertainment businesses to focus on not just short-term profits, but also the direction of the future.
Investors have many options to choose from in the entertainment industry. The best entertainment stocks have a combination of strong brands, growth potential, and competitive advantages.
Many also pay dividends to shareholders. You can see the entire list of consumer-cyclical stocks here.
You can also download the full list of consumer cyclical stocks (along with important financial metrics like dividend yields and price-to-earnings ratios) by clicking on the link below:
Below we highlight three of the best entertainment stocks that can stand the test of time. These stocks also pay dividends to shareholders, and have positive expected returns over the next five years.
Table of Contents
In this article we will take a look at the top 3 entertainment stocks in the Sure Analysis Research Database that have the highest expected returns over the coming five years.
Our top 3 entertainment stocks are ranked below, according to their 5-year expected total annual returns, in order of lowest to highest.
You can jump to any specific section of the article by clicking on the links below:
Entertainment Stock #3: ViacomCBS (VIAC)
- 5-year expected annual returns: 3.8%
ViacomCBS Inc. is a multinational media conglomerate. The corporation was formed via the re–merger of CBS Corporation and Viacom on December 4, 2019, the two created from the split of the original Viacom in 2005. The Company’s content brands include CBS, Showtime Networks, Paramount Pictures, Nickelodeon, MTV, Comedy Central, BET, and the Paramount+ streaming platform.
The company has six different revenue segments, where Advertising, Affiliate, and Content Licensing are the most significant revenue source. ViacomCBS generated more than $25 billion in fiscal 2020.
The company reported second–quarter (FY) 2021 results on August 5, 2021. The company reported revenues of $6.56 billion versus $6.07 billion in 2Q20, or 8% increase year–over–year. For the first six months of the year, revenues are up 11% compared to the first six months of FY2020.
Entertainment Stock #2: FoxCorp. (FOXA)
- 5-year expected annual returns: 6.9%
Fox Corp. is a television broadcasting company with a $20.5 billion market cap. FoxCorp. was spun off from the former 21st Century Fox when The Walt Disney Co. (DIS) acquired most of that company’s assets in 2019, including its cinema entertainment business. Since the spinoff, Fox Corp. has been a much more focused company, with its operations centered on Cable Networks & Television. For Fiscal Year (FY)2020, the company generated $12.3 billion in revenue.
On August 4th, 2021, Fox Corp. reported fourth–quarter and full–year results for Fiscal Year (FY)2021. Fox Corp. reported total quarterly revenues of $2,890 million, a 19.5% increase from the $2,418 million reported in the prior quarter. For the twelve months of FY2021, the company generated $12,909 million, 4.9% higher than the entire year of FY2020.
We expect annual returns of nearly 7% per year for FoxCorp., comprised of 5% EPS growth, the 1.2% dividend yield, and a small boost from a rising P/E multiple.
Click here to download our most recent Sure Analysis report on FOXA (preview of page 1 of 3 shown below):
Entertainment Stock #1: Comcast Corporation (CMCSA)
- 5-year expected annual returns: 11.2%
Comcast is a media, entertainment and communications company. Its business units include Cable Communications
(High–Speed Internet, Video, Business Services, Voice, Advertising, Wireless), NBCUniversal (Cable Networks, Theme Parks, Broadcast TV, Filmed Entertainment), and Sky, a leading entertainment company in Europe that provides Video, high–speed internet, Voice, and Wireless Phone Services directly to consumers.
Comcast reported its Q2 2021 results on 07/29/21. For the quarter, the company’s revenues climbed 20.4% to $28.5 billion, adjusted EBITDA rose 12.6% to $8.9 billion, adjusted earnings–per–share (EPS) climbed 21.7% to $0.84, and free cash flow (FCF) of almost $4.8 billion.
Source: Investor Presentation
We expect annual returns above 11% for Comcast, based on expected EPS growth of 9%, the 1.8% dividend yield, and a small boost from a rising P/E multiple.
Click here to download our most recent Sure Analysis report on CMCSA (preview of page 1 of 3 shown below):
In short, there’s a lot of hype when it comes to entertainment stocks. It is easy to get caught up in the latest and greatest transformation of what people enjoy watching and interacting with.
However, from an investment return prospective, it’s often the enduring company that can add on new technology to its existing business model that offers consistent returns.
Think of Disney moving from movies to theme parks to toys, or its evolution of old films released in VHS, DVD and now streaming as examples.
The three entertainment stocks mentioned above have a few things in common. They have storied histories to go along with a continued adoption of the future.
Moreover, the securities remain reasonably priced, and all three pay dividends to shareholders.