Christian Radio Preps for Election Dollars

Steve Kanaval |

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Salem Media Group Inc. (SALM) is starting to price in the glut of cash that will come from the presidential election cycle. It is hard to put a number on what it will mean in revenue for Salem Media, but it will be a big number, and current shares may not have priced in this revenue and potential dividend increase.

The company, through its Salem Radio Group, is the largest commercial US radio broadcasting company providing Christian and conservative programming. Salem owns and operates 112 local radio stations, with 67 stations in the top 25 media markets, with nationally syndicated programs comprising Christian teaching and talk, conservative talk, news and music, and is positioned to profit from the upcoming election cycle.

Salem Making Moves to Improve Revenue and Margins

The company has made many changes in management in each market, and they are going through a massive internal shift to improve revenue and margins. It also seems to be more radio industry legacy leadership changes at hand, but the real catalyst has been the increased dividend paid – and the potential for the common shareholder to get paid as well.

Salem currently pays a cash distribution for the second quarter of 2015 in the amount of $0.0650 per share. The cash distribution will be paid on June 30, 2015 to all Class A and Class B common stockholders of record as of June 16, 2015. I see this number going higher, and I think portfolio managers do as well. I think this is an interesting way to play the election cycle, and it has reflected in the stock price since May – shares have risen from $4/50 to the current $6.25 level.

The amount of money projected to be spent on the 2016 election is staggering, and as more candidates enter the field, the higher ad spend will be. They will use radio and TV advertising, which is why we are seeing this come out in several stocks pegged to election advertising dollars.

This small-cap media company currently valued at $150 million is way undervalued here, and with some leadership and execution, shares should continue to price in expected revenues. I would guess that as you add candidates to the field, smart managers will be picking away at accumulating a position in this thinly traded stock, knowing they will get a dividend and price appreciation.

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