Six Flags Entertainment Corp (NYSE:SIX) has dipped in price after last week releasing its quarterly and year-end earnings which failed to impress investors. Although the company’s sales continued to grow, net income was down year over year and led to the stock dropping more than 14% on the results.
However, the results don’t make Six Flags a bad buy and instead it could be a great opportunity for investors to lock in a great yield as a result of the sharp decline in price. Currently, quarterly dividend payments of 82 cents per share provide shareholders with a yield of around 6%.
Normally, investors only get that type of a yield when buying a risky stock. In Six Flags’ case, it’s a result of a drop in price. With the stock not far away from its 52-week low, it could have a lot of upside while also offering investors a very high payout as well.
Since dividend yield is inversely related with price, a drop in value can make a yield much higher, even temporarily. While timing the market might not be an optimal strategy, timing a dividend stock could help you secure a higher yield than when times are good.
The danger of course is that a falling stock could drop further in value and you just end up using the dividend income to offset the losses, or worse, the company ends up cutting or eliminating its payouts.
However, Six Flags has produced strong results thus far and it does not look like a business that’s in any danger, as theme parks continue to be very popular and will likely continue to be so for the foreseeable future.
