Here’s an interesting Seeking Alpha article on Lamar and the billboard industry. The article mentions two reasons why I like the billboard industry:
(1) Barriers to entry caused by the need to get a sign permit.
(2) The low cost of outdoor versus other forms of local media. Outdoor has a cost per thousand which is well below local TV, magazines and newspapers.
The stock analyst is skeptical about Lamar for a couple reasons:
(1) He is worried about Lamar’s ability to pay dividends in a recession. The analyst wants to see an 11% cash dividend on the Lamar REIT and he thinks this won’t be sustainable during a recession. In 2009 Lamar’s revenues declined 12%.
(2) He is worried about local regulations which will require sign companies to take down illegal signs without just compensation. I can’t think of an instance where this has happened to a client of mine. 8-sheets are a different matter. I think many 8 sheet operators have unpermitted, illegal signs which may be at regulatory risk for fines and takedowns.
One criticism of the piece. I found only 1 mention of digital signs and that was in a table. How can you write an article analyzing the prospects of an outdoor advertising company without discussing the impact of digital signs.
