Six Flags Entertainment Corp: Why SIX Stock Is A Compelling Dividend Play
Six Flags Stock’s Revenues Are Growing
If you spent a small fortune at a theme park this summer, you might be wondering if Six Flags Entertainment Corp (NYSE:SIX) stock is a good investment. Well, it might help you to know that SIX stock is a good income investment that delivers a steady dividend.
Six Flags stock has been giving investors an impressive dividend yield for some time. The charts indicate that SIX stock’s dividend yield has been over 3.7% since May 2013.
The 4.37% dividend yield reported on October 6, 2016, was fairly typical of SIX stock’s performance in recent years. Six Flags stock had a 4.32% dividend yield on October 6, 2015; 5.53% on October 7, 2014; and 5.59% on October 8, 2013. (Source: “Six Flags Entertainment Dividend Yield,” YCharts, last accessed October 7, 2016.)
Shareholders of SIX stock have been receiving a cash dividend for every quarter since December 2010. Not only is that dividend steady, it has been growing steadily for the past two years.
On September 16, 2013, SIX stock shares paid a $0.45 dividend that increased to $0.47 in November 2013, $0.52 in November 2014, and $0.58 in November 2016. These numbers show that Six Flags stock’s dividend is capable of sharp increases—it went up by $0.06 in November 2015. (Source: “Six Flags Entertainment Corporation New Dividend Date & History,” NASDAQ Stock Exchange, October 6, 2016.)
That dividend is what makes Six Flags a really good income stock, but some people will wonder if it is a value investment. After all, it operates expensive theme parks and complex rides in a cyclical business that is very vulnerable to economic trends.
Six Flags is making money despite the nature of its business. Its financial numbers for June 30, 2016 reveal a profit margin of 14.96% and a net income of $173.44 million.
More importantly, Six Flags reported growing revenues of $1.315 billion for the second quarter of 2016. Those revenues were actually up sharply from June 2015, when Six Flags reported a figure of $1.197 billion.
Six Flags’ revenue growth accelerated over the past two years. Between June 2014 and June 2015, revenues grew by $88.0 million, rising from $1.109 billion to $1.197 billion. Over the next 12 months, revenues increased by $118.0 million, rising from $1.197 billion to 1.315 billion. (Source: “Six Flags Entertainment Revenue (TTM),” YCharts, last accessed October 7, 2016.)
The Value at Six Flags
Six Flags has demonstrated that its business is capable of substantial revenue growth. The company has also shown that it is capable of making money off of its theme parks.
At the end of second quarter of 2016, Six Flags reported a free cash flow of $153.45 million and $467.45 million in cash from operations. It was able to keep $163.55 million of that money in the form of cash and short-term investments.
There was a lot of other value at Six Flags Entertainment Corp in the form of $2.59 billion in assets on June 30, 2016 and an enterprise value of $6.417 billion on October 6, 2016. That value gives Six Flags the leverage it needs to borrow money and upgrade its theme parks when necessary. (Source: “Six Flags Entertainment (SIX),” YCharts, last accessed October 7, 2016.)
Six Flags Upgrades its Technology
Six Flags has been substantially upgrading its parks and technology in recent years. Its latest plans include a 66-acre solar power facility designed to provide electricity for its “Six Flags Great Adventure” in Jackson, New Jersey. The idea behind the solar farm is to cut one of Six Flags’ biggest expenses: its electric bill. (Source: “Six Flags to hold off on clearing thousands of trees for solar farm,” NJ.com, October 4, 2016.)
Another state-of-the-art technology that Six Flags is taking advantage of is virtual reality. This year’s “Fright Fest” event at “Six Flags Over Georgia” will feature “Rage of the Gargoyles,” a roller coaster augmented by virtual reality.
The use of virtual reality helps Six Flags to charge adults $65.99 and children $45.99 to get into Fright Fest. Those prices are in addition to all the money Six Flags makes off of the food from the concession stands. (Source: “Six Flags’ virtual reality coaster unleashes gargoyles for Fright Fest,” Atlanta Journal Constitution, October 3, 2016.)
The Bottom Line on Six Flags Stock
Six Flags stock is a good income investment because of its steady dividend and high return on equity. Its shares delivered a return on equity of 557.4% on June 30, 2016. (Source: “Six Flags Entertainment Return on Equity (TTM),” YCharts, last accessed October 7, 2016.)
If you want to get back some of the money you or your kids spent at the theme park this summer, you might consider adding SIX stock to your portfolio.