Investors see Comcast paying dividend in '08

By Yinka Adegoke

NEW YORK, Jan 17 (Reuters) - Comcast Corp (CMCSA.O), the largest U.S. cable company, may have to initiate a stock dividend this year to boost its beleaguered share price, reversing a long-standing company policy.

Comcast has lost about 40 percent of its market value over the past 12 months as investors dumped the stock when it became clear that the cable service provider would be hurt by the U.S. housing slump and economic downturn, amid stiffer competition from telephone and satellite company rivals.

Long-term shareholder Gamco Investors (GBL.N) says that by offering a dividend, Comcast could attract a wider range of institutional investors who only buy stocks that guarantee dividends.

"I wouldn't be surprised if Comcast issued at least a nominal dividend this year," said Chris Marangi, a portfolio manager at Gamco, which holds 1.8 million Comcast shares.

Investors say they have been watching for any sign from Comcast executives, even their body language, when the issue of dividends comes up at conferences, and they believe the company is seriously considering one.

When asked at an investor conference why dividends are not part of Comcast's "shareholder dialogue," Chief Financial Officer Michael Angelakis said, "I don't think dividends are not part of the dialogue. They've always been part of the dialogue."

A Comcast spokesman said Thursday the company would not add to Angelakis' comments.

Comcast last issued a quarterly cash dividend, of around 2 cents a share, in March 1999. But in recent years, the company has favored stock buybacks. Analysts say this offers more flexibility as a strategy for returning value to shareholders than the constraints of a regular quarterly dividend.

In the year to Sept. 30, 2007, Comcast repurchased $1.85 billion worth of shares, and in October, it boosted its buyback program by $7 billion.

The repurchases have not done much for the stock, which is in "a valuation no-man's land," said Miller Tabak analyst David Joyce.

"Value investors don't want to buy it because they're not seeing free-cash-flow growth and there's no dividend, while growth investors are concerned about the onset of competition," Joyce said.

WRONG SIGNAL?

The challenge for the Comcast board is that a dividend could attract new investors but could also signal a lack of confidence in future business growth to lift the stock.

Comcast is not alone in avoiding dividends. Time Warner Cable Inc (TWC.N), the second-largest U.S. cable operator, and Cablevision Systems Corp (CVC.N) have also focused to varying degrees on reinvesting shareholder capital in upgrading their networks and launching new digital services.