Bears will point out that United Online’s dial-up internet business is declining. No argument there, other than it is dying much, much more slowly than most prognosticators had expected. Dial-up also represents only 18% of UNTD’s revenues, so its importance is often overstated.
The vast majority of UNTD’s revenues come from FTD. The floral retailer posted a 6% growth last quarter, while competitor 1-800 Flowers saw a decline of 6%. The company also operates Classmates.com. This forgotten social network generates $200M per year
Finally, United Online generated nearly $50 million in free cash flow last quarter which was a 28% growth over the previous year. The company’s cash balances continue to grow (currently at $121M or $1.39 per share) and Wall Street expects the internet stock to earn $1.09 per share next year.
The company also has a fairly large debt burden, $305 million in long term debt, and the current ratio (current assets/current debt) is .88 (which is not strong). Stocks paying high dividends in this market (low interest rates) are attractive but not without risk. United Online is certainly risky but the high yield sure is attractive. I do not own stock in United Online (I will watch it though).
Related: Where to Invest for Yield (March 2010) – S&P 500 Dividend Yield Tops Bond Yield: First Time Since 1958 (Nov 2008) – More Companies Cutting Dividends Than Any Year Since Before 1954 (Feb 2009) – 10 Stocks for Income Investors (Dec 2008)