The Motley Fool

£3k to spend? A 6%-yielding dividend stock I bought for my ISA and will never sell

2019 has proved to be a lead balloon Cineworld Group (LSE: CINE) and its shareholders, the company’s share price dipping almost 20% since the start of January as box office takings have disappointed.

I’m not panicking though. Tough trading conditions have been caused by an unfavourable film slate versus 2018, so it’s no wonder that revenues have dipped. In truth, the global box office remains extremely strong, underpinned by the steady stream of sequels, reboots and popcorn movies from the likes of Disney and Marvel.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

And so this disappointing calendar year is likely to prove a blip, in my opinion. I consider Cineworld to still be a great long-term play on our love of the movies, and particularly as it continues to build its global network of cinemas.

A Christmas gift

Following its move into the North American marketplace almost two years ago with the game-changing purchase of Regal Entertainment Group, the FTSE 250 firm has got its chequebook out again in end-of-year business to snap up Canada’s biggest movie theatre operator Cineplex for US$2.1bn.

Cineworld’s shares tanked when news of the deal hit the wires on Monday morning, investors fearing the growing weight of debt on the balance sheet following that US$3.6bn takeover of Regal. The latest deal will put another US$2.3bn of debt on the pile (which comprises the acquisition itself, related expenses and the refinancing of Cineplex debt).

But market-makers have greeted the deal, possibly agreeing with the board that it could prove “strongly earnings and cash flow accretive.” Cineplex has a three-quarters share of the Canadian marketplace, one in which box office revenues and ticket prices have risen 1.9% and 3.5% in the four years to 2018. Moreover, Cineworld believes that the enlarged group could realise colossal cost savings over the next couple of years, of US$120m by the end of next year and US$130m by the close of 2021.

Long-term gain but short-term pain

Those high debt levels can’t be ignored, and they threaten to linger on the balance sheet for a long period. But in a global market which is (by and large) only going from strength to strength, and the business throwing up boatloads of cash, I believe that the possible risks are far outweighed by potential rewards.

Indeed, many are predicting that the global cinema market will stabilise in 2020 before powering to new records in 2021, fuelled by a ramping-up in superhero movies from DC and Marvel and a packed slate of other much-loved franchises (like the new Matrix movie, John Wick, Jurassic World, Avatar, and Fantastic Beasts 3 to name just a handful). And through its near-1,000-strong global cinema estate, Cineworld is well placed to capitalise on this fertile environment.

And at current prices the screen icon trades on a rock-bottom forward P/E ratio of 9.6 times and carries a monster 6.1% dividend yield. Cineworld’s a share I bought for my Stocks & Shares ISA and I think anyone should follow my lead and enjoy a little movie magic.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Royston Wild owns shares of Cineworld Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.