Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

November 20, 2009 - WWE, Inc. (WWE-NYSE), an integrated media and entertainment company, engages in the sports entertainment business. The company develops content centered around its talent, and presents at its live and televised events featuring World Wrestling Entertainment brands. It operates through four segments: Live and Televised Entertainment, Consumer Products, Digital Media, and WWE Studios.

The Consumer Products segment licenses and sells retail products, including toys, video games, home videos, apparel, and books; and publishes magazines, including lifestyle publications with native language editions in Spain, Mexico, France, Germany, and Greece.

The Digital Media segment operates Web sites; offers advertising; sells merchandise on its Web site at WWE Shop Internet storefront; and offers broadband and mobile content.

The WWE Studios segment engages in the distribution of entertainment films featuring its talent. This segment focuses on creating a mix of filmed entertainment, including theatrical films, direct-to-DVD movies, scripted television movies, series, and reality programming. The company was founded in 1980 and is based inStamford, Connecticut.

Talk about brand extension. This company is so much more than 2 guys in a ring beating each other up. This is a marketing juggernaut that pulls in money from many different sources, mostly based on the wrestling stars it creates and promotes. And the public can't get enough of it. Revenues will dip this year but for the last three, they've been going higher each year.

In 2006, total sales were $263 million, then went to $485.7 million, followed by $526.5 million. This year, consensus from 6 analysts is $481 million. Next year, they see $501.4 million. Revenues for 2008 were: Live and Televised Entertainment: 63%; Consumer Products: 26%; Digital Media: 7%; WWE Films: 4%.

Earnings were a little more erratic. In 2006, they were 44 cents a share, then went to 72 cents a share. Last year, they dipped to 62 cents. This year, consensus is for 71 cents, then 79 cents in 2010. Fourth quarter earnings will be out in January. Look for 18 cents a share, same as last year's fourth. In the first quarter of 2010, expect 30 cents a share, well above the 14 cents of this year's first period.

In spite of the rough economy, people are still going to wrestling matches, paying for special tv events and buying WWE merchandise. In the third quarter, revenues were a little higher than the third period last year, thanks to international sales which made up for a weaker domestic market. Earnings jumped more than 70% from the third quarter of 2008 because of cost cutting over the last several months.

Management is aware of the wrestling image as too violent. It's evolving its product to become more family friendly, attempting to appeal to younger audiences, hoping to attract more sponsors and families to its live shows. It also wants to put out more films, directly to the DVD market. Look for The Marine 2 in December. It will be heavily promoted on its tv programs, pay per view events and the WWE Web site.

For income investors, it's all about the dividend. It's 36 cents a share for the Class A shareholders (that's the class you buy on the NYSE). The annual pay out is $1.44. That gives a yield of 9% at the current price. There is a small concern: the dividend is more than earnings and cash flow combined. While management is determined and has confirmed that it will continue to pay the current rate, investors need to be aware that unless earnings and/or cash flow increase, the dividend may be jeopardy. So this stock is more suitable for the aggressive income investor.

More numbers: Market Cap is $1.17 billion. Trailing P/E is 22.24 while the Forward p/e is 20. Price to sales is 2.44. Price to book is 3.43. Book value is $4.65 a share. Operating margin for the last 12 months was 18% while Profit margin was 10.91%. Return on equity was 14.82%. There's $205.76 million in cash which is $2.78 per share. Total debt is only 1% of capital or $4.14 million. Current ratio is 4.16. There are 73.9 million shares outstanding with 25.183 million of class A shares and 47.713 million for class B shares. Insiders own 66.5% of the stock.

This stock surprised me. It has lots of cash and very little debt. Management has shown a very conservative approach to the business. It's also aggressively expanding the brand. While the current dividend is a little too much for earnings and cash flow, with management's commitment to keep it at this rate, aggressive income investors should find this stock of interest.

- Company Web site: www.wwe.com

 Ted Allrich