Cramer Explains Meredith’s Stock Surge

In recent episodes of “Mad Money,” host Jim Cramer has sought to explain the reasons behind why some stocks move in directions that seemingly defy logic.

On Friday, he highlighted Meredith , a media and marketing company that publishes 20 subscription magazines, including Better Home and Gardens, Family Circle and Ladies’ Home Journal. Despite dwindling readership of print media, the Des Moines, Iowa-based publisher’s stock has recently been “rallying like crazy.” The stock has climbed 42 percent in the last five months and is currently within striking distance of its 52-week high.

Cramer pointed out that Meredith isn’t a pure play on magazines, though. The company gets less than two-thirds of its sales from publishing. In fact, it also operates a local television business that includes 13 stations in markets across the country.

The reason Cramer thinks Meredith’s stock is spiking, though, has to do with its dividend yield. In October 2011, the company announced a 50 percent dividend boost. It currently sports a 4.5 percent yield. The company also announced a $100 million stock buyback, which is equivalent to roughly 10 percent of the company’s market cap and certainly more than enough to actually make a difference to shareholders.

“Meredith’s commitment to its shareholders has made a huge difference,” Cramer said, noting the stock is up 35 percent since the dividend increase was announced. “Dividends have magical properties. Meredith raised their yield, and it caused the stock to levitate, despite being weighed down by the moribund magazine business.”

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