TEGNA (TGNA, Financial) recently secured the number two spot in our Yield Leaders Rankings, thanks to its impressive shareholder yield of 13.1%. Although the stock has remained relatively flat in 2024, several positive trends could trigger a significant rally. It also offers shareholders a 3.5% annual dividend yield.
What is TGNA? Similar to Sinclair Broadcast (SBGI, Financial), TGNA owns TV stations across major U.S. markets. However, TGNA stands out with 64 TV stations in 52 markets, making it the largest owner of top network affiliates (NBC, ABC, CBS, and FOX) in the top 25 markets, reaching approximately 39% of U.S. TV households. TGNA operates a single segment, generating $2.9 billion in revenue last year, primarily from subscription fees and advertising.
What has been holding TGNA back this year? The U.S. economy has been a drag on TGNA, with no positive year-over-year revenue growth since Q4 2022. The most recent Q2 results were underwhelming due to a sluggish and uncertain economy, which affected national advertising spending.
- Positive Trends Emerging: Despite national ad spending challenges, local ad spending showed resilience in Q2, driven by small and medium local businesses. This trend may gain momentum as the Federal Reserve cuts interest rates, benefiting sectors like automotive and housing.
- Political ad revenues are also providing a boost. Last week, SBGI raised its political advertising revenue outlook for the next quarter and 2024, reflecting a tight national election and diverse local audiences. TGNA reported strong bookings from political ad spending in Q2.
- Additionally, TGNA's aggressive buybacks have been notable. The company repurchased about 3% of its total shares in Q2 and 27% since May last year. TGNA has completed just 56% of its $350 million commitment to shareholders through buybacks and dividends.
While economic challenges and cord-cutting remain concerns, the recent interest rate cut could spur ad spending. Live sports also keep local channels essential for pay-TV providers. With TGNA trading down slightly over the year, it presents an attractive entry point for income seekers aiming for significant price appreciation. As always, consider a 15-20% stop loss limit.
