Cineplex Inc. (TSX:CGX) has long been considered a buy-and-forget holding for a number of reasons. There’s the impressive monthly dividend, the innovative offerings the company introduced to breathe life into the tired movie-and-popcorn business model, and a slew of acquisitions and opportunities that continue to redefine Cineplex as an entertainment-first company. Let’s take a look to see if any of these points are still valid, and if Cineplex is still a worthy investment for your portfolio. The impressive dividend Cineplex offers a monthly dividend of $0.14 per share, which amounts to a respectable yield of 3.39%. In terms of growth,…
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Cineplex Inc. (TSX:CGX) has long been considered a buy-and-forget holding for a number of reasons.
There’s the impressive monthly dividend, the innovative offerings the company introduced to breathe life into the tired movie-and-popcorn business model, and a slew of acquisitions and opportunities that continue to redefine Cineplex as an entertainment-first company.
Let’s take a look to see if any of these points are still valid, and if Cineplex is still a worthy investment for your portfolio.
The impressive dividend
Cineplex offers a monthly dividend of $0.14 per share, which amounts to a respectable yield of 3.39%. In terms of growth, Cineplex has been relatively flat over the past few years, rising just a little over 5% in the past two years.
As a longer-term investment, the stock has a brighter history. It has appreciated over 60% in the past five years.
That hardly makes Cineplex a great growth stock on its own, particular over the short term. Cineplex is an income investment first and foremost. Growing the company has taken a secondary seat, despite some impressive new offerings It has released over the past few years.
There are only so many bags of popcorn you can sell at a screening, and there are countless ways we can now consume the latest blockbuster from Hollywood.
Whereas movie theatres used to be the go-to place to watch exclusive new releases, we can now stream movies on our smart TVs and tablets from the comfort of our homes.
In short, Cineplex needed to innovate the traditional business model for movie-goers or be left behind. Fortunately, Cineplex did several things, all of which have been wildly successful to date.
Cineplex’s VIP experience allows movie-goers to experience the movie in larger, more comfortable, leather-recliner reserved seating. Patrons of the VIP experience also get to swap out the popcorn and pop for a chef-inspired menu and wine list. The experience carries a higher price point than a typical ticket, but customers don’t mind paying for the added amenities and reserved seating.
Cineplex has a segment of the business that is behind the growing number of flat screen TVs appearing as menu signage in fast-food outlets around the country. This is a unique opportunity for Cineplex, and that media signage segment continues to grow with each passing quarter.
New opportunities and acquisitions
When we think of Cineplex, we predominately think of the movie theatre company, but in reality, Cineplex is more accurately depicted as an entertainment company.
One opportunity that appears to be gaining steam with customers is the Rec Room. The Rec Room is a massive configurable room that can be used to host any number of events from birthdays and small get-togethers to corporate sponsored and catered events.
The rooms can be upwards of 40,000 square feet in size and offer live entertainment, food, and games, which, unlike the theatres, are not reliant on Hollywood’s blockbuster season for growth.
That concept is set to expand as the company rolls out more locations to additional cities across the country and potentially into the U.S. market. Last September, Cineplex purchased U.S.-based Tricorp Amusements Inc., which serves as a distributor for arcade games across the U.S. and Canada, also offering game room design services that complement the Rec Room initiative.
Is Cineplex a good investment?
In my opinion, Cineplex remains a good investment, especially for those investors looking at long-term growth. While the stock’s growth has flowed in recent years, Cineplex continues to innovate and provide new avenues for growth, lessening the reliance on revenue from movie theatres.
Furthermore, the stock may seem expensive to some investors at a P/E of 38.87, but the company continues to deliver during results time, and Cineplex’s acquisitions suggest that a larger expansion into the U.S. market may be just a matter of time.
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Fool contributor Demetris Afxentiou has no position in any stocks mentioned.