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Why Six Flags is returning capital to its shareholders

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Capital return

A fundamental business goal of Six Flags Entertainment Corp. (SIX) is returning capital to its shareholders. The company wants to generate superior returns over the long term. As part of the strategy to achieve this goal, Six Flags has declared and paid quarterly cash dividends each quarter since the fourth quarter of 2010.

On October 21, 2014, Six Flags’ board of directors approved an increase in the company’s ongoing quarterly cash dividend from $0.47 per share of common stock to $0.52 per share of common stock. The fourth quarter 2014 dividend was paid on December 8, 2014.

During the first nine months of 2014, Six Flags invested $95 million in new capital, paid dividends of $136 million, and repurchased 3.1 million shares of its common stock.

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Share buyback

On November 20, 2013, Six Flags’ board of directors approved a new stock repurchase program that permits it to repurchase up to $500 million in shares of its common stock over a four-year period. As of October 17, 2014, Six Flags repurchased 4,185,000 shares at a cumulative ~$156.6 million at an average price per share of $37.42 under the program. This leaves the company with ~$343.4 million available under the board’s current share repurchase authorization.

In August 2014, SeaWorld Entertainment’s (SEAS) board of directors authorized a share repurchase program of up to $250 million of its common stock. The program began on January 1, 2015.

If you want to invest in these leisure companies, you can invest in ETFs such as the Consumer Discretionary Select Sector SPDR Fund (XLY), the Vanguard Consumer Discretionary Index Fund (VCR), and the iShares U.S. Consumer Services ETF (IYC).

Management’s comments

Jim Reid-Anderson, chairman, president and CEO (chief executive officer) of Six Flags, said, “Our Board of Directors and management team are confident in the company’s future growth prospects and our ability to generate strong recurring cash flow. In addition to our solid operational performance and nearly five percent dividend yield, an expansion of our stock repurchase plan provides us yet another way to deliver value for our shareholders.”

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