Deutsche Bank Reiterates Buy Rating on Viacom (VIA.B)

Deutsche Bank is out with an analyst note this morning where they reiterates their Buy rating on shares of Viacom Inc. (NYSE: VIA.B); they have a $47.00 price target on the stock.

Deutsche Bank analysts cited the company’s recent announcement that they would restart their share repurchase plan in Q4 2010 with the authorization increased to $4 billion. They suggested that the buyback would take up to three years to complete.

DB noted, “This implies VIA shares out of 610m is headed to 520m, a 15% reduction (@ $45/shr average repurchase price).”

In addition, Viacom also announced a quarterly dividend of $0.15, which is an annualized yield of 1.8%. This amounts to about $365million per year, or 18% of FCF. Combined, this will approach a return of 90% of FCF in 2011 (a 10% yield), placing it among the leaders in large cap media.

Deutsche Bank believes this is good news, adding, “Certainly there was much anticipation of this given debt leverage had dropped to the bottom of their target range, its debt had been paid down or termed out and mgmt consistently indicated it would consider these options in due course, and, in fact, our model has assumed since February that share repurchases would resume.”

They closed by saying, “For our part, we had modeled in C3Q repurchases, which we have now eliminated, while leaving in our C4Q and beyond repurchases, and we added the cost of the dividend (hits interest expense), both of which trim our EPS estimates modestly (CY10 by $0.02to $2.80 and CY11 by $0.07 to $3.27), still above consensus levels and reflecting a very attractive valuation (12x '10E P/E, 10x FCF).”