Nexstar's Dividend Defiance: How the Media Giant Navigates Revenue Headwinds

Nexstar Media Group (NASDAQ:NXST) has long been a stalwart in the media landscape, and its latest moves underscore its resolve to reward shareholders even amid turbulent times. Despite a 3.9% year-over-year revenue decline in Q1 2025 to $1.23 billion, the company announced a 10% dividend hike to $1.86 per share, marking its 12th consecutive annual increase. The stock surged 8.2% pre-market, hitting near its 52-week high of $191.86, as investors bet on Nexstar’s ability to navigate headwinds and capitalize on structural advantages.

The Dividend Decision: Cash Flow Discipline

The dividend boost—coming after a quarter where non-political ad revenue fell 4.2% and political spending dropped sharply to $6 million from $38 million—reflects Nexstar’s confidence in its cash-generating power. Adjusted EBITDA of $381 million and free cash flow of $348 million, while down from prior years, remain robust. The company has prioritized shareholder returns, deploying $132 million in Q1 alone via dividends and buybacks.

The move also signals strategic focus: Nexstar’s 63% revenue dependency on subscription-based streams (vs. 37% from ads) provides a cushion against ad market volatility. CFO Leanne Gliha emphasized this resilience, noting that non-political ad declines are overstated—Q1/Q2 are only down mid-single digits year-over-year.

The Revenue Dilemma: Advertising Slump vs. Structural Gains

While advertising revenue fell 10.2%, the decline isn’t uniform. Non-political ad weakness in categories like insurance (-19%) and sports betting (-20%) contrasts with growth in service-based sectors (home repair, attorneys). Meanwhile, digital ads now account for 20% of non-political revenue, growing at a high-single-digit pace—a promising sign for diversification.

Distribution revenue, however, shone. Nexstar hit a record $762 million in Q1, up 0.1%, driven by CW affiliations and vMVPD (video multicast program distributor) growth. Over 60% of distribution agreements are up for renewal in 2025, with benefits expected to flow into 2026. The CW Network, though losing $10s of millions in Q1 due to programming costs, is on track to breakeven by 2026—a critical milestone.

The Wild Card: Regulation and M&A

CEO Perry Suk’s push for deregulation could be a game-changer. Removing broadcast ownership caps—a priority for FCC Chair Brendan Carr—could unlock M&A opportunities. Nexstar has already signaled interest in acquiring CW-affiliated stations and larger markets. With $6.5 billion in debt at a manageable 1.67x covenant ratio, the balance sheet can support deals.

Risks on the Horizon

• Ad Market Recovery: Goods-based ad categories (15% of revenue) face tariff-related pressures, which could drag results further.
• Regulatory Delays: FCC rule changes could take time, delaying M&A benefits.
• Distribution Renewals: 2026’s agreement rewrites could impact revenue growth if negotiations sour.

Conclusion: A High-Yield Play with Catalysts

Nexstar’s 4.77% dividend yield and shareholder-friendly stance make it a compelling pick for income investors, even as ad markets remain shaky. The company’s $190 stock price reflects optimism around CW’s turnaround, regulatory tailwinds, and distribution growth.

Crucial to the bullish case is Nexstar’s 63% subscription revenue base, which insulates it from macroeconomic swings. Meanwhile, the mid-teens viewership jump in CW sports programming and NewsNation’s demo-beating performance suggest content strategies are working.

While risks like ad softness and debt remain, Nexstar’s track record of capital allocation—prioritizing buybacks at depressed prices (e.g., $169.99/share in Q1)—adds prudence to its ambitions. With the stock near its 52-week high and analysts’ average buy recommendation (1.64), the question isn’t whether Nexstar can grow—it’s whether the market will reward its patience. For now, the dividend hike and stock surge suggest investors are betting on the latter.