A Stock Only A Value Investor Could Love

While there’s still fear out there in the land of credit, how about a nice, conservative, dividend-paying tech stock that even a value investor could love? The season is right for tech; and it is right for United Online , Cramer said.

United Online is an internet company that is a rare survivor of the halcyon days of dot-com euphoria. The company is engaged in two businesses: one is a legacy low-cost dial-up internet service provider – Netzero and Juno – remember those? UNTD also has a content business that it’s about to take public in order to bring out value. This business is made up of Classmates.com, a take on social networking for an older demographic, and MyPoints.com, an online rewards site. Classmates.com, which is the name of the soon-to-be-public subsidiary, has been growing sales through paid subscriptions, which is more than enough to offset the steady declines in the ISP business, Cramer said.

UNTD has two businesses but one enormous dividend with a 6% yield. It costs the company 80 cents a year and next year UNTD is expected to earn anywhere from $1 to $1.10 a share. It also has $191.4 million of cash on its balance sheet and zero debt – that’s a thing of beauty that works out to $2.80 of cash per share – enough to pay the dividend for more than three years even if the company’s profits vanish. The ISP business will eventually disappear, but until it does it creates a lot of cash that UNTD is using to pay a dividend to make the stock more attractive. Cramer is comfortable with that.

It’s the Classmates.com IPO that could bring the upside. The company is essentially an online social networking site that somehow gets people to pay for membership – and there are 50 million members! Last year, sales grew at 64.3% and it has maintained that rate so far this year even tough it is running at a slight loss. Cramer isn’t necessarily saying Classmates.com is a good company, but he doesn’t think that matters in the short run. The thing that’s intriguing is that this is possibly the first pure play on social networking, one of the hottest and most difficult to trade trends out there right now. The hype it gets from that trend, along with the already 50 million subscribers and the over 60% sales growth should help it trade at a multiple significantly higher than the 10 times forward earnings UNTD gets now.

Bottom Line: Cramer thinks you can own United Online for the 6% yield or for the Classmates.com IPO – there’s two ways to win, one for the cautious and one for the risk takers. The stock has two faces, but they both look like buys to Cramer.


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