Why the iSentia Group Ltd share price has rocketed higher this week

The iSentia Group Ltd (ASX: ISD) share price has rocketed higher this week, surging more than 14% between Monday and Tuesday. It has retreated 6 cents, or 3.6% again today, although that is at least partially due to the shares going ex-dividend today. The company recently declared a 3.1 cents per share dividend, fully franked, which equates to a gross 4.4 cents per share.

Unfortunately, iSentia’s rally this week will likely have done little to appease long-term shareholders who have watched their shares plummet in recent months. Indeed, the shares traded as high as $4.14 as recently as October but have since endured two substantial re-ratings – one in November and one in February. At $1.605, they have fallen 61.2% since that peak.

Source: Google Finance

Source: Google Finance

iSentia’s King Content business is one of the primary culprits behind the most recent decline. During the first half of financial year 2017, the Content Marketing segment (which includes King Content) saw its revenue decline 11% year-on-year, with a $2 million loss in earnings before interest, tax, depreciation and amortisation (EBITDA). It expects a full-year EBITDA loss of $3 million for the segment.

So, although iSentia has been among the market’s best performers this week, it seems likely that the rally has simply come as a result of the market realising the stock may have become oversold. That is entirely possible and, if iSentia can improve King Content’s performance and grow its organic business, today’s price tag could prove an attractive entry point.

That said, risk-averse investors may want to steer clear of this business, at least until the company can demonstrate that it is back on track towards long-term growth.

A Big, Fat, Fully Franked Dividend

This company's dividend is almost the stuff of legends. Since it started paying dividends in 2007, it has increased its payout to shareholders every single year, a run that includes 21 consecutive dividend increases.

Based on the last 12-months of dividends, its shares are currently offering a fully-franked 4.8% yield, which grosses up to almost 7% when those franking credits are included. And in stark contrast to the likes of Commonwealth Bank and Telstra, this company just increased its dividend by over 13%, and guided for 2017 profits to grow by 20%!

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Motley Fool contributor Ryan Newman 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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