Dividend Investing In A ‘Mad Men’ World

Face it, advertising is all around us. Whether we’re zoned in on a screen, large or small, hit the road or even inside a public bathroom advertising messages are constantly bombarding us. With so many companies and organizations trying desperately to get their message across it’s no wonder that the advertising space is huge. But have you ever considered the advertising agencies that are responsible for creating these ads and other public relations and marketing services? While a relatively large market exists for these communication entities, from a dividend perspective there are very few companies that are public let along pay a dividend within this space. With that being said, let us take a look at some of these unique dividend players that I have yet to see in any dividend growth portfolio.

 

First up, is The Interpublic Group of Companies, Inc. (IPG). Founded in 1902 and headquartered in New York, NY, IPG provides advertising and marketing services globally ranging from consumer advertising and digital marketing to public relations and event productions. Currently yielding 2.52% with a moderate payout ratio of 45.8% this dividend appears to be quite safe with room for future growth based on current cash flow. The streak for dividend raises is short for this stock going back only a few years but seems to be on its way to securing future raises. From a valuation perspective, IPG has a current PE of 21.4 which is slightly above its five year average of 18.2. Forward PE looks a lot more attractive at 15.5.

 

Next among the dividend paying advertising agencies is Omnicom Group Inc. (OMC). Like IPG, OMC is based in NewYork, NY and offers its services worldwide including brand consultancy, content marketing, crisis communication, database management, direct marketing, entertainment marketing, media planning and buying, mobile marketing, multi-cultural marketing, non-profit marketing, package design, product placement, reputation consulting, retail marketing, search engine marketing, social media marketing, and sports and event marketing services. With a current yield of 2.37% and a moderately low payout ratio of just 41.9% the dividend also appears to be safe with plenty of room for future growth. Speaking of growth, OMC has an impressive ten year annualized dividend growth rate of 16.09%. The stock currently sports a PE of 18.6 which is above its five year average of 16.3. Forward PE stands at 16.2 suggesting you might want to wait before pulling the trigger on this name even though both names are trading around the S&P averages.

 

I’ll briefly mention for those looking into the REIT space, you might want to consider Lamar Advertising Co. (LAMR). While not an advertising agency this company does offer a generous yield of 4.74% selling advertising space on billboards, buses, shelters, benches and more. There’s little doubt that none of us haven’t encountered a Lamar product at some point in our lives.

 

Clearly, the choices are slim, yet interesting, if you are considering adding some additional diversification to your portfolio in a very well utilized but often missed sector. Advertising agencies and advertising in general will not go away any time soon as businesses and organizations are on the constant lookout to continually push their own products.

 

Have you ever considered any stocks in the advertising agency space? Please let me know below.

 

Disclosure: Long NONE

27 thoughts on “Dividend Investing In A ‘Mad Men’ World

  1. LAMR seems interesting although what’s their growth consistency like? Billboards are pretty good and I imagine cheap to run and they definitely have a captive audience. I’d be a bit wary of traditional advertising because there’s a lot of changes going on with more mobile/online advertising. Thanks for highlighting some of the lesser known dividend payers.

    • Hi JC,

      I too am interested in learning a bit more about LAMR. Just when you thought of every possible REIT out there along comes one in the billboard space. I guess there are REITs for every imaginable piece of real estate. The other names seem to have a handle on digital/mobile trends as they do offer many SEO services as well as online marketing techniques. In any case, this was a unique sector to consider. Thank you for stopping by and commenting.

  2. Thanks for pointing out Lamar. That’s exactly the type of business I’m interested in. I have been trying to get my group of friends to buy out one of the local billboard companies, but no takers so far. While a lot of retail advertising is being disrupted, I imagine there will always be a market for gas stations and fast food advertising along highways. On our 10 week roadtrip, we saw plenty of billboards…..and Clear Channel and Lamar were usually the owner/operator of the signs. One quick note, Lamar seemed to have a lot of B and C locations. Maybe they are filling a lucrative niche. I’ll look into it.

    Thanks again. I hope your week is going well
    -Bryan
    Income Surfer recently posted…Potential Investment Thoughts- May 2016My Profile

    • Hi IS,

      Happy to showcase some of these lesser known dividend payers. LAMR deserves some more attention as you pointed out seeing a lot of their billboards on the road. They are plentiful here in the west as well and quite frankly I never even thought of billboards as a REIT. When you think about it, REITs as a sector are quite diversified in their own respect. Years ago, my brother had the idea of buying up some local independent billboards along the highway in the desert but never pulled the trigger as prices seemed a bit too high at the time. I don’t see billboards going away any time soon and many of the newer ones are digital displaying several ads rotating on one billboard. Like any industry, even the lowly billboard is adapting to a digital world. As always, I appreciate your comment. Enjoy the road!

    • Hi EL,

      I never heard of the two advertising agencies though they seem to be the ‘big dogs’ in the space. LAMR billboards are almost everywhere I go so I have heard of that name though never thought of it as a potential REIT investment. Thanks for sharing your take on these stocks.

  3. Definitely interesting. Advertising is everywhere, as you said. Even our blogs rely on advertising for revenue.

    That said, industries like advertising aren’t really too appealing to me. Maybe because my question would be “What do they own? What assets does the business have in case of a downturn? What sort of competitive advantage to they have?”

    That last one is big for me on these companies. The only real assets that they have is their creativity. A business that has to constantly be creative (or innovative, as it usually is) in order to stay afloat has too much risk attached to it for me. It’s the same reason I avoid tech stocks. I’d rather the businesses I own be simple and “automated” (KO, PG, HSY, KHC, etc). Plus, what’s stopping their clients from moving to a competitor?

    Plus, with advertising as pervasive as the industry is, what growth prospects does it have? Sure, an individual company can gain more market share, but it can just as easily lose it. I don’t see much of an economic most, just a competitive industry with little growth options available.

    That advertising REIT looks interesting. And being a REIT, they are making money off physical assets that they own rather than having to constantly create and innovate. Collecting rent (or whatever it would be called here) is a nice and easy business. I like nice and easy.

    Sincerely,
    ARB–Angry Retail Banker
    ARB recently posted…Why Is Everything In Retail Banking A F***ing Problem!?My Profile

    • Hi ARB,

      Your second paragraph raises some very good points regarding the intangible assets of these ad agencies. You are correct in the assumption that they’re basically an intellectual property type of business that has to continually come up with new and innovative ways to advertise and competition can come from a well established player in the space or some creative kid in a garage with a camera. Like you, I like tangible businesses that make and sell actual physical products. Sure, that school of thought keeps me out of FB, but it also keeps me away from GRPN, P, ZNGA and the like. Based on the comments, it seems like LAMR is garnering the most interest among our fellow dividend investors as it owns and sells physical real estate. As always, I appreciate your comments and perspectives.

  4. I have to agree with ARB on the agencies being one client or defection away from being relevant. I’ve never seriously considered billboards since I figured they were on their way to extinction with LBJ’s highway beautification project. Obviously I was wrong on that score. With that said, there two other options in billboards, OUT and CCO. Outfront was a CBS spinoff and has REIT status as well. CCO I wouldn’t consider as they have been selling assets (some to LAMR) are 95% owned by IHRT, which is embroiled in a court case regarding reallocation of assets between subsidiaries.

    • Hi Charlie,

      Thanks for sharing some other billboard REITs with us. I think we’ll be seeing billboards for the foreseeable future as they too have adapted to the digital world and are now offering multiple ads on one board space. Some even are testing personalized ads that can detect individuals who pass by and display relevant ads to them. Kind of like targeted advertising we see online with the likes of cookies, etc. Definitely an interesting REIT to consider. The ad agencies on the other hand, I agree, don’t offer the same type of protective moat for their business and may present much higher risk longer term. As always, I appreciate your comment.

    • Hi DG,

      Always happy to introduce new dividend paying stocks to my readers. Who knew that there were dividend paying advertising agencies? Or even REITs in the billboard space? Thank you for stopping by and commenting.

    • Hi easydividend,

      I find it fun and interesting featuring dividend paying companies that most have never heard of let alone considered for their own portfolio. Glad you enjoyed learning about these dividend payers in an industry we never talk about. Thank you for commenting.

  5. Great ideas about advertising companies. I have a friend who owns a large privately held advertising firm. He makes an unreal amount of money. Since it’s private, I cannot invest in it, but these companies sound like good alternatives.

    Thanks for bringing this to my attention.

    Regard,
    Financial Slacker

    • Hi FS,

      Clearly there aren’t many advertising companies that are public let alone ones that pay dividends. Still, it was interesting to uncover these names and learn a bit about their businesses and how their stocks trade. There’s little doubt that ad agencies can bring in some big bucks but it’s always a never ending creative campaign to continually maintain some sort of competitive moat. Thank you for stopping by and commenting.

  6. Hey Keith,

    Thanks for sharing, as others have said, the REIT one seems like a . What about the London-listed WPP, does it trade in the US? It seems to have increased its dividend (in GBP) every year since 2005.

    Australia also has a couple of listed advertisers. One called Ooh! Media (outdoor advertising and other types) listed in Jan 2015 at $1.935, today it is $5.14, 265% in a year and 4 months, plus a current 1.8% yield (2.5% with franking credits) not bad.

    Another called APN Outdoor which has done horribly and doesn’t pay a dividend.

    I love learning about new companies 🙂

    Tristan
    Dividendsdownunder recently posted…IVF Baby Progress UpdateMy Profile

    • Hi Dividendsdownunder,

      This is why I love reading comments from people outside the U.S. WPP does trade in the U.S. with the ticker symbol WPPGY. This name did not come up on my screen and I thank you for sharing this name. As you can see, there aren’t many dividend paying companies in the ad agency sector but it’s still interesting to find and learn about new names when you can. You never know when something compelling comes up in a search. Thanks for sharing some Aussie listed advertisers too. While a name or two might look interesting I think it speaks volumes that no online dividend portfolio holds any of these names. As always, I appreciate your comment.

    • Hi DD,

      I said the same thing to myself, “Who knew?” I guess you can find dividend paying companies in every known sector that’s out there. Even advertising agencies. While interesting to uncover, I’m with you and have no plans to buy into any of these stocks. Seems like an industry with too small protective moats. As always, I appreciate your comment.

    • Hi BII,

      I agree with your comment about investing in advertising agencies. Their only moat is their intellectual property they create and these days advertising inspiration can come from the largest ad agencies or some creative kid in a garage with a camera. Look at what Chewbacca Mom did for a mask that was selling at clearance prices prior to her video. You couldn’t pay to get that kind of advertising. As always, I appreciate your comment.

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