Why British Sky Broadcasting Group plc Tops The Telly And Media Sector

We have a few impressive companies in the FTSE 100 covered by the less-than-exciting umbrella of “media”. And all of them have beaten the index over the past five years — in fact, some have stomped it into the ground.


Take satellite TV operator British Sky Broadcasting (LSE: BSY), whose shares are up more than 60% over five years to 879p after year-on-year growth in earnings, compared to the 37% managed by the FTSE.

That’s nice, but it’s nothing compared to good old ITV (LSE: ITV), whose shares are up 300% over the same period to 216p after the company revamped itself and brought home increasingly strong profits.


Educational publisher Pearson (LSE: PSON) saw a sharp price drop early this year after a profit warning preceded weaker-than-expected first-half results. But at 1,136p, the shares are still up more than 50% over five years.

Anglo-Dutch multinational publisher Reed Elsevier (LSE: REL) is perhaps not hot on many people’s lips. But its share price has soared since mid-2012 to 993p today, more than doubling over five years.


And finally, we have advertising giant WPP (LSE: WPP), with the second-best price performance of the five — up 135% to 1,274p, and with a solid track record of earnings and dividend growth.

Here’s how they compare:

  British Sky
ITV Pearson Reed Elsevier WPP
Market cap £15.2bn £8.8bn £9.2bn £11.3bn £17.1bn
Year ended Jun 2014
Dec 2013 Dec 2013 Dec 2013 Dec 2013
EPS change 0% +23% -15% +9% +8%
P/E 15.1 17.3 19.1 16.6 16.4
Dividend Yield 3.5% 1.8% 3.6% 2.7% 2.5%
Dividend Cover 1.88x 3.20x 1.46x 2.20x 2.46x
Year ending* Jun 2015
Dec 2014 Dec 2014 Dec 2014 Dec 2014
EPS change +4% +16% -8% +4% -1%
P/E 14.1 16.8 17.4 17.5 15.6
Dividend Yield 3.9% 2.0% 4.5% 2.7% 2.9%
Dividend Cover 1.84x 3.00x 1.28x 2.13x 2.24x
Year ending* Jun 2016
Dec 2015 Dec 2015 Dec 2015 Dec 2015
EPS change +10% +11% +16% +6% +10%
P/E 12.6 15.1 15.0 16.5 14.1
Dividend Yield 4.1% 2.3% 4.7% 2.8% 3.2%
Dividend Cover
1.92x 2.81x 1.42x 2.13x 2.19x

* forecast

After such impressive price rises, we’re really not looking at bargain-basement P/E ratios or stunning dividend yields here.

Which is best?

The question is which, if any, are good prospects now?

I’ve always admired WPP over the years. It hasn’t paid market-busting dividends, but they’ve been solid. The shares have been more volatile than the FTSE and dipped a bit lower during the crunch, so if that worries you then it might not be your choice — but the upside has been much better than the downside.

I’m also impressed by ITV’s storming performance over the past couple of years, but I’m not sure how much longer it can keep up with the double-digit growth. And dividend yields aren’t great — although they’re the best covered of the lot.

Sky’s the one

But I have to say, at the moment I think Sky is looking the best value. We had a flat year of earnings in the year to June 2014 and there’s only a 4% rise forecast for the current year, and that’s probably taken the edge of investors’ appetite. But a stronger 10% EPS rise predicted for 2016 would make the valuation look attractive, especially with dividend yields of around 4%.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended British Sky Broadcasting. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.