A stock picker’s guide to Twenty-First Century Fox Inc in 2014

Expectations of growth are running high for investors in Fox.

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It seems to be a never-ending roundabout for shareholders in Twenty-First Century Fox Inc (ASX: FOX) with the global media giant that is headed by billionaire Rupert Murdoch announcing yet another change in its corporate structure.

During 2013 Fox demerged its news and publishing assets into the separately listed News Corp (ASX: NWS), while retaining the film and television assets within Fox. This led to two distinct businesses – Fox which was seen by many as housing the growth assets and News Corp which was viewed as having been lumped with the old world declining media assets.

The demerger was a major undertaking and after just a few months of relative calm, Murdoch then announced Fox would seek to remove its ASX listing and consolidate its trading on the NASDAQ stockmarket. This has been seen as a blow for the local bourse and for Australian investors with the ASX losing one of its largest companies, while many fund managers will be forced to sell a high-quality company due to restrictions on holding overseas stocks. (The delisting is expected to occur around May 2014).

Growth continues

It is indeed a shame that some investors will lose the opportunity to own stock in Fox. For the first quarter of FY 2014 Fox reported an 18% increase in revenue to US$7.06 billion. Around half of the growth in revenue was attributable to Cable Network Programming, Filmed Entertainment and Television divisions. The other half of growth was due to the inclusion of revenue from Sky Deutschland.

Growth in Fox’s dividend has also been strong with the company declaring a final dividend for FY 2013 of US12.5 cents per share – a 47% increase on the prior period.

Foolish takeaway

Murdoch reaffirmed the company’s aim to grow operating income before depreciation and amortisation to US$9 billion by 2016. Based on an annualised run rate from the first quarter, this implies growth of 39% over the next two years. If this target is met, it would be an exceptional achievement for such a large company.

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Motley Fool contributor Tim McArthur owns shares in Twenty-First Century Fox Inc.

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