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Why the Prime Media Group Limited share price slumped 5.8%

For savvy investors chasing yield, one stock which is bound to have crossed their paths is leading regional free-to-air (FTA) broadcaster Prime Media Group Limited (ASX: PRT).

Prime has been a relatively consistent payer of dividends and with the share price having struggled in the last few years given the market’s concerns surrounding the structural challenges facing the industry, the yield on offer has been exceptionally enticing.

Does that above average yield still look good? The company’s full year results provide some insights…

  • Revenue down 0.6% to $258.8 million
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) up 3.2% to $66.9 million
  • Net profit after tax from continuing operations up 14.2% to $35.6 million thanks to an emphasis on cost control which saw a reduction in total operating expenses of 7.4%.
  • Net debt down 26.2% to $78.9 million

Outlook

From an industry wide point-of-view, obviously the FTA sector faces some immense challenges with all three major network owners – Seven West Media Ltd (ASX: SWM), Nine Entertainment Co Holdings Ltd (ASX: NEC) and Ten Network Holdings Limited (ASX: TEN) – all languishing near their 52-week lows.

Prime’s management has provided guidance that it’s experiencing subdued trading conditions in the first quarter of the current 2016 financial year and it holds “modest expectations for the first half.” Audience share and revenue share for Prime has been improving over the course of calendar year 2015 and the upcoming 2016 Rio Olympics is expected to have a positive benefit on revenues.

The all-important dividend

A final fully franked dividend of 3 cents per share (cps) has been declared by the board. Prime’s shares will trade ex-dividend on September 3 with payment on September 24. For the full year shareholders will have received 6.8 cps in fully franked dividends. With the shares last trading at 56.5 cents, this implies a huge fully franked dividend yield of 12%.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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