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Black Eye For CBS?

Talk about winning the battle but losing the war.

CBS is home to some of television's top rated shows, including 60 Minutes, the CSI series and other fine entertainment properties.

But its heavy dependence on local radio and television that has left the company particularly vulnerable to the economic slump.

"The focus of prime broadcast misses the point," said Sanford Bernstein's Michael Nathanson. "It's the high-margin local business - the local radio and television and outdoor - that's really feeling the slowdown."

And that has made CBS's juicy dividend the subject of much conjecture. The stock currently yield around 17%, ridiculously high by any standard, but particularly high for a media stock. Time Warner's dividend yield stands at 2.7%. Disney yields just under 2%

The options market, and to a large extent the stock market, have already priced in a dividend cut. According to "Options Action" contributor Mike Khouw, prices for longer-dated puts and calls suggest a 50% chance of a dividend cut come January. "Options traders in general seem to be pricing in a fairly large possibility of a dividend cut," said Khouw.

But some believe the cut could come a lot sooner, perhaps even this quarter.

"Previously, we expected CBS to simply cut its dividend in half over the coming six months," wrote Pali Capital's Rich Greenfield. "However, as the TV station outlook grows more dire, we believe management has no choice but to eliminate the dividend over the coming quarter." Greenfield rates CBS a sell.

The so-called Tiffany Network is set to report earnings on the 18th. And we will be watching.

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