Comcast

Internet, Phone, and Cable TV

Germany has a miserable rate of stock ownership. Among other things, that's due to the negative experiences of the dot-com bubble. The "people's stock" Telekom certainly played a major role here too. Around 100 million Deutsche Mark was poured into marketing campaigns meant to promote the stock as extremely safe. Many Germans trusted Telekom and bought a stock for the first time in their lives. The stock shot up and, after the bubble burst, fell into a bottomless pit. Just a few calculations to illustrate: If you had bought the shares on the day of the IPO, November 18, 1996, they would be up a whole 2% today. Whoever bought the shares at the peak is still down almost 85% today - nearly 20 years later! Mind you, dividend payments are left out here - but even with dividends, Telekom would, in my opinion, be a crappy investment.

What if, instead of Telekom, you had bought its American counterpart, Comcast Corporation? Again, assuming we had bought in November 1996, today we would have a return of over 1,600%, also without dividends. Is it still worth getting in today?

The Origins and Business Model of Comcast Corp.

Ralph Joel Roberts was born in New York City on March 13, 1920. His parents, Robert Max and Sara Wahl Roberts, were both Russian-Jewish immigrants who built up a remarkable fortune in America by owning a chain of pharmacies. When Robert suddenly died of a heart attack, the family moved to Philadelphia. Ralph was 17 years old at the time. He graduated from the University of Pennsylvania and then decided to serve in the US Navy for 4 years. When he then started his working life, he had various jobs. He sold golf clubs, worked for the background music company Muzak, and later at the Pioneer Suspender Company, a men's accessories business. There he worked his way up to the position of managing director and also took a stake in the company himself. In 1963, he decided to sell his stake and, together with his brother Joe, invest the proceeds in a business with more future.

During their search, the two quickly became aware of the Jerrold Electronics Company, which wanted to sell its subsidiary, American Cable Systems Inc. The Roberts brothers brought in the young accountant Julian Brodsky and the former systems director of Jerrold Electronics, Daniel Aaron, to evaluate the offer. Even though the cable TV provider only had 5 channels and just under 1,500 customers at the time, they quickly knew that this investment had great potential. So the Roberts brothers took over the business and offered both Brodsky and Aaron to help them manage it. But the business was anything but a sure-fire success. To keep driving growth, they even went door to door selling themselves at times. In the following years, they bought more cable TV providers. While customer numbers grew, it didn't have much impact on the company's profits.

Ralph J. Roberts realized that he had to restructure his company to make it successful. He was no longer even happy with the rather static-sounding company name. So from the two words Communication and Broadcast, he created the new name Comcast. On March 5, 1969, the Comcast Corporation was then officially re-founded. To be able to handle larger acquisitions, however, more capital was needed.

So the company went public in June 1972. The fresh money made further expansion of the cable TV provider possible. But that wasn't all: In 1988, Comcast set foot in the mobile phone industry with the 230 million US dollar takeover of American Cellular Network Corp. Business continued to go very well, so that in December 2001 it was able to take over the cable TV division of AT&T. 8 years later came the partial acquisition of 51% of NBCUniversal. The remaining 49% stake was only taken over from General Electric in February 2013. To also position itself better in the international market, most recently, in October 2018, it took over the Sky Group. All in all, the Comcast Corporation has developed into a colossal media group. Besides its own Hollywood studios, several TV networks, theme parks, and even its own ice hockey team, it is one of the most important American cable TV, internet, and phone providers.

How Will Comcast Corporation's Business Develop in the Future?

Well, I assume the media group will certainly keep trying to expand its position in the international market. You could see that very well with the Sky takeover. I also find Comcast's plan to build a new global news channel pretty interesting. NBC Sky World News is supposed to launch as early as this summer. By joining forces, the new channel might be able to compete against its two main rivals, CNN International and BBC World News. For now, though, Comcast isn't primarily concerned with making as much money as possible here, but first of all with establishing a new brand and delivering objective reporting.

The company will soon also get into the streaming market, taking a completely different approach than Disney+ or Netflix. In April 2020, it plans to roll out Peacock, Comcast's streaming service, on its own platforms. At launch, the app will be available free of charge to all cable customers in the USA and all SkyQ customers in Europe. That way, it could reach around 55 million households in one fell swoop. The service is free, but it's financed through advertising revenue. Anyone who isn't a Comcast customer yet will also be able to subscribe to Peacock separately. Another thing I find interesting is that, despite having its own platform, it still wants to keep selling its movies and series to others. Disney+, on the other hand, wants to offer its productions only on its own streaming service going forward. I'm curious to see how Comcast will fare in this market.

Comcast Corp. can already be proud of a very broad and crisis-proof diversification today. Nevertheless, I think it will continue to keep its eyes open for suitable takeover candidates that can be easily integrated into the existing network.

And What About the Dividend?

Similar to many other technology and media companies, Comcast also started paying a dividend to its shareholders relatively late. Shareholders have only been receiving a quarterly dividend since 2008. What's nice, though, is that it has raised its dividend every year since then, by an average of 17.7 percent over 10 years. That's a really top performance. The low payout ratio of just under 30 percent also leaves plenty of room for growth. Even though the dividend yield of 1.8 percent isn't particularly high, you get a well-rounded overall package here.

Conclusion:
Comcast Corporation has developed into one of the largest media and technology companies in the world. It's positioned globally and earns good money in many different industries. The broad diversification also easily cushions individual weak business segments. If I had to choose, I would probably prefer The Walt Disney Company. But I have to admit that Comcast is without a doubt an attractive investment.