Tune In to CBS - TheStreet Tune In to CBS

The media company is paying you to wait for a turnaround.
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Editor's note: This article originally appeared on on July 24.

It looks like


(CBS) - Get Report

is finally cheap enough. At the current price, the shares yield more than 6%, and the business is getting better. The company is committed to building shareholder value by returning cash and is expected to keep increasing the payout -- the company has done so in six of the last nine quarters. In the first quarter, the company generated more than $900 million in free cash flow, which more than supports the payout. CBS is also sitting in a substantial cash hoard, with more than $2 billion on its balance sheet. Management is looking for acquisitions in what it considers to be three key areas: deals that add programming content, new interactive technologies and content, and outdoor advertising companies that increase international exposure.

In the core television business, CBS has a solid prime-time lineup and is expected to continue to show healthy ad rates. The current political season is going to help the bottom line. In the first quarter, the company benefitted from the primary elections, with political ad revenues climbing to record levels. Syndication revenues in the first quarter were also up substantially. The company renewed its

Everybody Loves Raymond

deal and put together a self-distribution deal for the megahit series


. The two deals led syndication revenues to an 85% gain in the quarter. CBS currently has eight of the top 10 syndicated shows and has a very deep pipeline that will allow syndication revenues to continue growing.

Cable channel Showtime is also doing well for the company. The suite of Showtime channels added more than 5 million subscribers over the last year. The network's edgy original series, such as




, have attracted viewers to the network and have done very well in syndicated and DVD sales. At the Television Critics Association summer press tour, the company announced several new series, including a spinoff from hit show

The L Word

. The network also announced a seven-year movie deal with The Weinstein Company that will allow them to continue adding to the network's movie programming.

CBS Radio appears to be getting stronger as well. It divested 39 stations in smaller markets last year to focus on major metropolitan areas. The company has reported ad sales growth in four of its five key markets, including a 1% rise in the key New York City marketplace. The company has been doing a road show to increase advertising interest in its radio stations, and it appears to be working. The division owns 178 stations in 40 markets, and it also owns 18% of

Westwood One


and 10% of micro-cap

Spanish Broadcasting

. The weak economy may hurt ad sales in certain markets, but increased political ad revenues will offset some of the impact in key radio markets.

The outdoor advertising division has seen slowing growth rates, but it is still growing, even in the weak economy. The company grew outdoor advertising revenues in the first quarter despite losing municipal contracts in Toronto and San Francisco. The division continues to expand internationally. CBS recently closed on the acquisition of South American billboard and advertising company

International Outdoor Advertising

. CBS is already active in the outdoor market in Mexico, and this IOA deal will facilitate further expansion into key South American markets.

Concerns about the economy have hurt the stock this year -- most of CBS' revenue comes from advertising sales. Shares have fallen almost 50% in the past 52 weeks, and the stock is trading just off its lows for the period at less than 10 times earnings; the enterprise-value-to-EBITDA ratio is just 5.2. Management is committed to growing the dividend and has the cash to make acquisitions in key areas and business segments.

Headwinds certainly exist, but the dividend yield of more than 6% allows investors to get paid well while waiting for the economy to turn. When it does, CBS will benefit from a portfolio of premier media businesses and should reward patient shareholders very handsomely.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Westwood One to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

At the time of publication, Melvin had no positions in the stocks mentioned, although positions may change at any time.

Tim Melvin is a writer from Stevensville, Maryland, who spent 20 years a stockbroker, the last 15 as a Vice President of Investments with a regional firm in the Mid Atlantic area. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Melvin appreciates your feedback;

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