Meredith Corp.: Better Homes and Dividends

If you're looking for a solid dividend-paying stock, magazine publisher Meredith Corp. (MDP) could fit the bill. It's financially strong, has a history of raising its dividend and generates plenty of cash to cover the payouts.

With the rise of the Internet, old media companies don't always get the respect they deserve. And Meredith is a good example. The 104-year-old publisher of Better Homes Gardens and more than 100 other subscription magazines and special-interest newsstand publications has a long record of consistent earnings and dividend growth. Revenues and earnings hit record levels in September, helped by the recent acquisition of Family Circle, Parents, Child and two other titles from Gruner + Jahr.

Meredith's publishing business (about 75% of its $1.2 billion in revenues) will look even better over the next few years as the new titles' operating margins (operating profits divided by revenues), currently less than 5%, approach the mid-teens average of established Meredith magazines.

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Yet Meredith's stock, recently $54, has gained only a small amount over the past two years. (The share price has been trending higher in recent weeks.) Standard Poor's analyst James Peters thinks the shares are worth $60 and rates the stock four stars, SP's second-highest grade.

Meredith magazines, such as Ladies' Home Journal and Traditional Home, have long appealed to middle-aged female homeowners. The acquisition of American Baby in 2002, combined with the recently purchased titles, extend the Des Moines company's reach to a younger audience. Siempre Mujer, a new title, targets the fast-growing Hispanic market. Meredith also owns 14 TV stations, a book-publishing arm, profitable Web sites and an 85-million-name database that is used to boost subscription sales.

There are some headwinds, though. Postage and paper costs are rising, and a slowdown in the housing market could hurt Meredith's many home and remodeling titles. Consumers are still spending money on their homes, says Meredith president Stephen Lacy. "But it's one of the reasons we feel good about balancing our portfolio" with the recently acquired family-oriented titles, he says.

Meredith has paid a dividend for 58 straight years and has raised it the past 12. With an annual payout of 56 cents, the stock yields 1.1%.

The stock trades at 19 times estimated earnings of $2.86 a share for the year ending this June.

--David Landis