The Motley Fool

Down 60% in 12 months! I think this 8%+ dividend yield’s too good to resist

If you’d bought shares in Cineworld Group (LSE: CINE) a year ago you could be forgiven for kicking the proverbial cat today. It’s lost a whopping six-tenths of its value since then and it’s now dealing at seven-year troughs.

I’m one of those unfortunate souls who loaded up on the cinema chain prior to this collapse. It’s just over 60% for the 17 months in which I’ve held it in my own stocks portfolio.

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!

I’m disappointed, sure. And I’m a little bit worried about the condition of Cineworld’s balance sheet. However, if you don’t hold the leisure giant in your own stocks portfolio, I reckon it’s a brilliant buy at current prices. As well as trading on a rock-bottom forward price-to-earnings (P/E) ratio of 5.1 times it carries a monster 8.6% dividend yield for 2020.

Bond gets bashed

Cineworld’s been one London’s biggest stock casualties this week. The ball was set rolling with news that the next big-ticket-selling James Bond adventure ‘No Time To Die’ would be delayed. A release date of April has been put back to November on fears that COVID-19 will hit takings.

It was Peel Hunt’s response to the news that sent investors packing though. The broker said that delays to other popular, revenues-spinning titles are “likely” amid mass cinema closures in parts of Asia.

As I say, this latest news has me somewhat concerned. I’ve spoken before about the size of Cineworld’s large debt pile, exacerbated by ambitious acquisition activity in North America. If Western audiences stay at home on fears of contracting the virus, and more major movies become subject to delayed release dates, the business may struggle to repair the balance sheet as quickly as it had hoped.

Still in good shape

So the FTSE 250 share has been a bit of a disappointment since I bought in, to put it mildly. But am I still a believer in the company’s long-term outlook? You betcha.

The rule of successful share investing is to buy and hold shares for a minimum of around 10 years. Volatility is part and parcel of it, and providing that you’ve bought a company with enough quality, then it should recover from any turbulence.

Cineworld is a share that I still really believe in. The timing of its acquisitions in the US and Canada — moves that have made the cinema operator the second biggest on the planet — could have been better given the threat of diving box office takings in 2020.

Still, the rationale of expanding into two of the biggest markets makes perfect sense for future growth. Much has been made of depressed cinema takings more recently, but a packed film slate for 2021 and 2022 should help the global box office power to fresh record highs.

Good news!

Cineworld’s reassuring update today has helped calmed my nerves too. It said that it has not witnessed “any material impact” following the COVID-19 breakout and that it “continue[s] to see good levels of admissions in all our territories.” It also said that it has measures like cost reduction and capital expenditure postponement at its disposal to combat any impact of the crisis.

Clearly Cineworld isn’t without risk. But I would argue that this is baked into the company’s bargain-basement, sub-10 earnings multiples. I reckon it’s one of the most attractive dip buys out there.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

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.