What do essentially all businesses need to do? Well, marketing of course! Marketing is only becoming more and more important. All straight-shooting companies are thinking hard about their marketing and communication with current and potential customers. A really savvy management is probably seriously considering getting some help with their communications, so that they can focus on the core of their own business.
Who will help them?
Omnicom Group (NYSE: OMC) is an US based global network of advertising agencies, marketers, public relations specialists, CRM specialists and media planners. Omnicom Group acts as a holding company of these others businesses, for example BBDO, DAS, DDB Worldwide and TBWA.
If you are like me, these names mean nothing and can come off as boring. Reality is that this marketing power house is one of the most creative businesses in the world! How about a 2000 square meter Game of Thrones graveyard?!
So, this is an entity with enormous human capital, knowledge and talent. The market cap is at about 11 billion USD and they have about 70 000 employees worldwide. Did I mention they have their own University?! Their clients are over 5 000, in more than 100 different countries.
Selected financial metrics
Revenues are increasing slowly while profit is increasing a bit more aggressively. So profit margins are increasing which is always nice to see.
Book value has decreased but book value on a per share basis has increased. The reason behind this is that the company is buying back a lot of shares. This basically makes the shares we own more worth: it will be easier for the company to reward our shares in the future when they have a less number of total shares to reward.
Another strong point is the free cash flow that’s also increasing, albeit not in a linear fashion.
Of course, Omnicom has been affected by the coronavirus’ effect on the world economy. Numbers for Q2 2020 was worse than Q2 2019.
Q3 earnings are coming tomorrow so investors will be keen to see the most recent developments.
The forward yield for Omnicom is about 5 %. That is way higher than the broad market. This is also pretty much at an all time high, maybe indicating value here.
As you can see in the picture above, the dividend is going up! The 5 year CAGR is about 6 % and they have raised the dividend for the last 11 years.
The payout ratio has been steady in the 40 % range for several years, with a bump right now due to the coronavirus situation of the world. All of these numbers paint the picture of a very healthy, dividend orientated business.
Why I Invest
Omnicom occupies a very small portion of my Dividend Portfolio. I haven’t owned it for very long, and I plan on adding more in the near future and of course, hold “forever”.
On a high level, this company fills a nice hole in the media/marketing space in my portfolio, and this company is simply the best play in this sector. They also do a lot of cool stuff!
The dividend metrics are very solid and this company has great diversity and depth in its business, a long with a high retention rate of customers. I believe they will be successful for many years to come. Marketing and creativity is the future!
Looking at the stock chart year to date, it’s down almost 35 %. As already mentioned, this brings the current yield to an all time high and this might be a good time to get in on this fantastic business!