Lamar Advertising Company: Cash Cow Stock Yields 6%
Milk This Stock for Dividends
Today’s post highlights my favorite type of business for earning safe, large dividends: “cash cows.”
It might sound odd, but I’m a big fan of firms in mature, slow-growth industries. Because these businesses have limited growth prospects, owners can milk operations for ongoing income.
For this reason, cash cows pay out some of the highest yields around. It’s not uncommon to find names yielding anywhere from 10% to even 15%. Total returns also come out surprisingly high, given new competitors usually don’t enter these industries.
Take Lamar Advertising Company (NASDAQ:LAMR), for instance. The 112-year-old company doesn’t have much of a “sexy” factor, especially in an age of cryptocurrencies and hot tech stocks. But with a dividend yield coming in at nearly six percent, income hunters might want to give Lamar a second look.
You don’t need a PhD. to understand this business: Lamar owns posters, billboards, and other outdoor advertising platforms and rents out these spaces. No doubt you’ve driven past many of the firm’s 340,000 displays across North America.
Needless to say, the operation has matured (industry growth will only clock in at one percent this year). Those ads for “Joe’s Diner” at the next highway exit, however, still make a lot of money. Net revenues topped $1.5 billion last year, which have rolled in like clockwork for decades.
Better still, most of that money flows straight to the bottom line. Billboards cost a lot of money up front. You have to write a big check to property owners, in addition to getting approvals from local governments. But once you have the signup, they’re not that costly to maintain. Ongoing costs come in at just a fraction of revenue. The business therefore becomes a cash machine, spitting out income month after month.
Most of those profits get passed on to shareholders. Since 2015, Lamar Advertising Company has boosted the distribution five times. Today the company pays out a quarterly dividend of $0.91 per share, which comes out to an annual yield of nearly six percent.
That payout should keep growing. New digital displays cost less to maintain than older billboards, plus they last longer. And as we head into the next election cycle, analysts project a boost from political ad spending.
Exciting stuff? Hardly. This cash cow, however, is a lucrative business, which quietly spits out a lot of dividends. Investors will likely be milking Lamar Advertising Company’s oversized yield for decades to come.
Dear Reader: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. We are 100% independent in that we are not affiliated with any bank or brokerage house. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose. The opinions in this content are just that, opinions of the authors. We are a publishing company and the opinions, comments, stories, reports, advertisements and articles we publish are for informational and educational purposes only; nothing herein should be considered personalized investment advice. Before you make any investment, check with your investment professional (advisor). We urge our readers to review the financial statements and prospectus of any company they are interested in. We are not responsible for any damages or losses arising from the use of any information herein. Past performance is not a guarantee of future results. All registered trademarks are the property of their respective owners
Sign up to receive our FREE Income Investors newsletter along with our special offers and get our FREE report:
5 Dividend Stocks to Own Forever
This is an entirely free service. No credit card required. You can opt-out at anytime.
We hate spam as much as you do.