NXST: Broadcasting Strong Dividends in a Dynamic Media Landscape

In a world increasingly driven by digital content and local connections, Nexstar Media Group, Inc. (NASDAQ: NXST) stands out as a leader in local broadcasting. For retirees seeking a high-yield income stock with impressive growth potential, Nexstar offers a compelling investment opportunity.

As the largest local television station owner in the United States, Nexstar operates 200+ stations across 116 markets, covering approximately 63% of U.S. households. The company has a strong foothold in local news, a resilient segment of media consumption, and is diversifying into digital platforms to remain relevant in a rapidly changing landscape.

Income Potential

Nexstar boasts an impressive dividend yield of 3.6% (as of recent market prices), which is well above the average yield for the S&P 500. Over the past five years, the company has consistently grown its dividend by an average of 20% annually—a testament to its commitment to returning value to shareholders.

With a payout ratio of approximately 25%, Nexstar’s dividends are both generous and sustainable, leaving significant room for future increases. A $10,000 investment in NXST would currently generate $360 annually in dividends, with strong potential for continued growth.

Growth Prospects

Local News Resilience: Despite challenges faced by the broader media industry, local broadcasting remains a cornerstone of U.S. households. Nexstar’s dominance in this space provides it with stable advertising revenue and loyal viewership.

Political Advertising Windfall: Nexstar benefits significantly during election cycles, as political advertising remains a key revenue driver. With the 2024 presidential election approaching, the company is poised for a revenue boost.

Digital Expansion: Nexstar is actively growing its digital presence, with its digital revenue reaching $325 million annually. By leveraging its local market expertise and expanding into digital advertising, the company is diversifying its revenue streams and tapping into higher-growth opportunities.

Ownership of The CW Network: In 2022, Nexstar acquired a 75% ownership stake in The CW Network, positioning it to unlock value in the national broadcasting and streaming space. This provides additional opportunities for revenue growth through national advertising and content production.

Valuation

Nexstar trades at a forward P/E ratio of 7.2, which is significantly below the industry average of 15. This undervaluation suggests an attractive entry point for investors looking for high-yield income and growth potential.

Risk Analysis

While Nexstar has strong fundamentals, retirees should be aware of the following risks:

Advertising Cyclicality: Advertising revenues are highly cyclical and can decline during economic slowdowns.

Cord-Cutting Trends: The ongoing shift from traditional cable to streaming services poses a long-term challenge for traditional broadcasters. However, Nexstar’s investment in digital and streaming mitigates some of this risk.

Why Retirees Should Consider Nexstar

For retirees, Nexstar offers a rare combination of high income, strong dividend growth, and undervalued potential. Its dominance in local broadcasting, expanding digital footprint, and ability to capitalize on political advertising cycles make it a resilient and attractive option for income-focused investors.

With a dividend yield of 3.6% and consistent growth, Nexstar can provide retirees with both the steady income they need and the growth potential to combat inflation over the long term.