For an Enjoyable Ride, Add Theme Park Stocks to Portfolio
1. Big Thrills Add Up to Big Yields
Six Flags (SIX) and Cedar Fair (FUN) -- the country's two largest regional amusement park operators -- combined to entertain 49.6 million guests last year, and 80 percent of those visits came between Memorial Day and Labor Day. Many publicly traded amusement park operators pay out hefty quarterly distributions. Cedar Fair can get the credit for that pocket-happy trend. It's organized as a limited partnership, distributing most of its income to its stakeholders.
Cedar Fair units currently yield 5.3 percent. When Six Flags returned as a public company four years ago, it decided to also declare beefy dividends. It now yields a healthy 4.5 percent. Even marine life park operator SeaWorld (SEAS) decided to ride the wave when it went public in last year. Its stock packs a 2.8 percent yield.
Leading theme park operators Disney (DIS) and Universal Studios parent Comcast (CMCSK) aren't as generous with their payouts, with yields of 1 percent and 1.7 percent, respectively.
2. Parks are Making Big Investments for the Future
Gated attractions aren't hesitating to make big investments that will pay off in the coming years. Just a few days ago, Indiana's Holiday World announced that it will spend $22 million for an ambitious expansion next summer that includes the country's first launched wing coaster. If a small yet critically acclaimed family-owned park can justify that kind of investment, one can only imagine what the larger operators will do.
Universal Orlando has made a nine-figure investment this summer in its bar-raising Diagon Alley expansion. Despite some operating hiccups with the Harry Potter-themed area's flagship attraction, it should result in some huge attendance gains at both of its Orlando theme parks (and factor in four on-site resort hotels). Disney just completed its New Fantasyland expansion in Florida. Six Flags and Cedar Fair are starting to tease about new attractions that they will add next year.
3. Social Media Is Making Parks Smarter
Amusement parks may seem like an old school business, but this is an industry that was made for today's new media communications. Through Facebook (FB) and Twitter (TWTR), parks can reach out to fans, and park goers can share their experiences.
Park operators had a solid 2013. Industry tracker Themed Entertainment Association reports that the world's 10 largest theme parks experienced a 5.4 percent gain in attendance last year. We don't know how much of this growth was from parks getting more savvy with social media, but it's fair to say that parks having more consistent communication with their visitors has helped.
As parks get smarter -- finding ways to get to know their guests even better -- everyone will win. Patrons will be able to optimize their visits. Parks will rake in more money. Investors will enjoy their appreciating investments when they're not too busy depositing their quarterly distribution checks. It's a ride that everyone can enjoy.
Motley Fool contributor Rick Munarriz owns shares of Walt Disney. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. For more investment ideas, try any of our newsletter services free for 30 days.