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Will Falling Shareholder Returns Be a Concern for Viacom?

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Reason for the steep fall in shareholder returns

Viacom (VIAB) continues to reduce its shareholder returns by way of falling dividend payments and share buybacks. The company’s total return to its investors in fiscal 2017 fell 57% YoY (year-over-year) to $319 million as a result of its policy to slash leverage moving forward.

In the last five years, Viacom has returned ~$12.5 billion to its investors at an average of nearly $2.5 billion per year through $9.8 billion in share repurchases and $2.6 billion in dividend payments.

In the graph above, we can see a steep fall in shareholder returns in the last five years.

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Dividend yield comparison

In fiscal 2017, the company paid $319 million in dividends, or $0.80 per share, a fall of 43% YoY and the second successive yearly decrease in the dividend. At current, the dividend yield for the company stands at 2.5% compared to other media players such as CBS (CBS), News Corporation (NWSA), Comcast (CMCSA), and Disney (DIS) with their dividend yields of 1.2%, 1.2%, 1.5%, and 1.6%, respectively.

In fiscal 2017, the company made no investment in share buybacks compared to its investment of $100 million in fiscal 2016. Still, $9 billion worth of shares remain under Viacom’s $20 billion stock repurchase program.

The slowdown in shareholder returns has helped the company to maintain a healthy free cash flow. Its free cash flow at the end of fiscal 2017 stood at ~$1.5 billion compared to $1.2 billion in fiscal 2012. In the last five years, the company has maintained an average free cash flow of nearly $2 billion. Moreover, the company’s strategy to reduce its debt could further boost its cash flow going forward.

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