Video game maker Activision Blizzard (ATVI) pays out an unremarkable 1% dividend yield at current price levels, but that leaves out most of the value that management has returned to shareholders in the last year. Add buybacks to the picture, and ATVI returned $1.22 billion to investors in the last year for a whopping 9.03% shareholder yield.
Activision Blizzard is one of the biggest video game makers in the world, with a portfolio of wildly successful (and addictive) games. ATVI's franchises include Call of Duty, World of Warcraft, and Diablo, brands that generate blockbuster titles on a regular basis. But Activision's best attribute isn't its portfolio -- it's the firm's subscription model for online multiplayer games such as World of Warcraft. In the case of WoW, some 8 million subscribers shell out a monthly fee to play the game with others in real time. The result is a large chunk of high-margin recurring revenue. Better yet, that revenue is extremely sticky thanks to the huge sunk cost players invest in building out their characters in the game.
ATVI has flirted with bringing that pricing model to other more conventional franchises, such as Call of Duty. If they can pull it off, it'll be a coup for the gaming industry. ATVI's balance sheet took on $4.6 billion in debt in the last two years, but it still carries enough cash to completely offset those borrowings.
In the near-term, momentum looks on the side of ATVI investors.