This Powerful Company Just Declared a 100% Dividend Raise. Should You Buy?

Key Points

• Hint: It's a unique mix of sports and entertainment assets.

• The company is sharing the wealth after signing several lucrative deals with broadcasters hungry for its content.

• 10 stocks we like better than TKO Group Holdings ›

Dividend raises are common on the U.S. stock markets, especially in and around earnings seasons. For the most part, these hikes are modest; companies enacting them tend to add a few coins to the payout to keep up the dividend yield and boost shareholder morale, among other motivations.

It's exceedingly rare for a company to declare a dividend raise of 100%, however. Spinning out of the latest earnings season, one unique stock did just that. Read on to find out which company delivered that mighty financial punch.

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A pair of hot tickets

As September kicked off, TKO Group Holdings (NYSE: TKO) announced it was exactly doubling the quarterly dividend paid on its class A common stock (the shares that are publicly traded). The new payout will be $0.76 per share, up from the previous $0.38.

Image source: Getty Images.

TKO Holdings is a recently formed conglomerate that many folks might not be familiar with. It's a better bet that they've heard of the company's two anchor businesses: top "sports entertainment" purveyor World Wrestling Entertainment (WWE) and mixed martial arts (MMA) league Ultimate Fighting Championship (UFC). The company also holds a clutch of smaller, related assets.

Both WWE and UFC are very popular these days, with big audiences eager to consume their content. Now, where the audiences go, the broadcasters follow, and they're willing to dig deep into their coffers to air such material.

In early August, WWE signed an exclusive five-year deal with Walt Disney for the latter's ESPN streaming service to broadcast all of its "premium live events" (PLEs) -- including the flagship one, WrestleMania -- starting at some yet-unspecified point in 2026.

Neither company has put an exact value on their pact; according to various media reports, the total is $1.6 billion, equating to $320 million yearly.

From what we know, the value of this content is rising quickly. The comparable five-year deal WWE currently has in place with Comcast via the broadcaster's Peacock service includes both the PLEs and material from the wrestling company's once-proprietary WWE Network. Again, according to media reports, Comcast is apparently paying upward of $1 billion in total, or over $200 million annually.

The fate of the WWE Network library is uncertain after the Comcast pact expires.

Meanwhile, the more established of WWE's two weekly live shows, Raw, recently started airing on its new home. Yes, this venue is another streamer -- Netflix, which in early 2024 secured the rights to broadcast it.

The price? An official TKO regulatory filing says only this is "in excess of $5 billion" over the 10-year term of the deal. So we're talking at least $500 million per year.

That's nearly double the value of the preceding arrangement for Raw to air on Comcast's USA Network. Media sources place the value of that deal at $265 million annually.

Meanwhile, it seems UFC is also increasing sharply in value. In August (clearly a busy month for TKO), its parent secured a new broadcasting deal with the company now known as Paramount Skydance. It will air what's roughly the equivalent of PLEs, UFC's numbered events, plus the MMA specialist's frequent Fight Night programs on Paramount+.

Several media outlets report the arrangement, which begins next year, is worth $7.7 billion across a seven-year period, averaging $1.1 billion annually. The UFC numbered events and Fight Nights currently air on ESPN, which in mid-2018 paid $1.5 billion for a five-year stretch (i.e., $300 million per year). This term was later extended into 2025, although no dollar amount was disclosed for this.

Enduring popularity

Any person or business would feel quite flush after closing such deals; happily for TKO shareholders, the company is willing to share the increasing wealth.

In the press release trumpeting the doubled dividend, TKO quoted COO Mark Shapiro as saying that it comes directly "on the heels of our UFC and WWE U.S. domestic media rights renewals and the strong earnings and cash flow profile they provide, alongside the continued strength and momentum in our underlying business."

That's accurate. In TKO's second quarter, thanks in no small part to leading business unit WWE's 21% rise in revenue, the company's total top line increased by nearly 10% year over year to more than $1.3 billion. Looking forward, it also raised its revenue guidance for the entirety of 2025. As for profitability, headline net income increased by a robust 63% to $1.17 per share.

Although sports and entertainment are trend-driven businesses and can thus be quite up and down at times, TKO's multiyear contracts for its top content will keep the green flowing for many quarters. Over those spans, WWE and/or UFC might fade some in popularity, but both now have mass audiences, so shrinkage should be limited.

At the end of the day, TKO is a smart company effectively giving its audiences exactly what they want, and getting increasingly richer by doing it. I'm a holder of TKO stock presently, and have no intention of letting go anytime soon.

TKO's mighty dividend raise takes effect with the next payout, scheduled for Sept. 30 to investors of record as of Sept. 15. At the most recent closing price, the new dividend's yield would be 1.6%.

Should you invest $1,000 in TKO Group Holdings right now?

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Eric Volkman has positions in TKO Group Holdings and Walt Disney. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool recommends Comcast and TKO Group Holdings. The Motley Fool has a disclosure policy.