WWE Stock's Unusual Situation

CNN Money is reporting that the WWE has increased the dividend on its stock from 24 cents a share to 36 cents, a 50% increase. The current dividend yield on the stock is 7.9% which gives shareholders a $1.44 payout per share, annually. The payout is more than the stock's projected 2008 earnings of just 89 cents. Usually when this happens, stock screens will eliminate the stock as a "poor risk", because the assumption is the dividend will be eliminated completely. WWE has reported that they are doing well financially on their balance sheet, and therefore were able to increase the dividend payout for shareholders.

From Money.CNN.com:

"We have more than sufficient cash on our balance sheet to cover any shortfall between earnings and the dividend in the near term," company spokesman Gary Davis told IBD via e-mail.

He added that the company expects to increase profit and "grow into this new dividend in the next few years."

It holds $266 million in cash and short-term investments, almost no debt, low capital expenditures and has a free cash flow margin upward of 15%.

According to the company's 10-K, the new dividend will cost $80.6 million in the next fiscal year.

Sales increased 17% in 2007, the fastest growth since 2000. Earnings grew 26% last year.

In an interesting side note from the article, it was reported that this dividend increase only went to common shareholders, meaning none of the McMahon family will receive the increase.

See the full CNN Money article here.