Tyler McKinna's Dividend Money took a look at World Wrestling Entertainment (NYSE: WWE) which, surprisingly, is attracting attention as a dividend play at its current price. Lackluster performance and possibly the controversy surrounding the death of Chris Benoit and his family have sent the stock down to around $14 per share. A few months ago, it was trading over $18, a lot of volatility for an established company. The dividend yield has risen all the way around 6.8%. That's a pretty exciting yield for such an exciting company. Usually investors seeking income have to choose between utilities, shipping companies, and REITs, to name a few. But this is wrasslin'!

While the yield makes the stock look tempting and may provide at least a temporary floor for the stock, I wouldn't be buying this stock on valuation. WWE has managed to, in spite of an extremely strong brand and loyal fanbase, earn very ordinary returns on capital. The strong revenues from events, DVDs and television seem to get eaten away by ill-fated (and some would say ill-conceived) ventures like the XFL and, more recently, box-office blunders like Stone Cold Steve Austin's movie The Condemned. Aside: I recently saw The Marine, starring John Cena, and thought it was really good. It fared poorly on the big-screen, but has done well on DVD.

When evaluating income stocks, investors need to keep in mind that dividends don't really create value. Having a company that you own send you cash with a hefty tax is not very efficient. And if a strong brand like the WWE can't find anything better to invest its resources in, don't you have to wonder about the company and its management?

So the question I would ask is this: Where would WWE be trading if it paid no dividend? I suspect it would be lower -- a lot lower. The stock is trading at 2.7 times book value but only earns a return of about 11% on that. Earnings growth could be hard because the company pays out more in dividends than it earns -- that also means the dividend isn't sustainable. Without a dividend, the market might value this stock at less than $10 per share. Dividends are fool's gold: They don't really create value, and the stock shouldn't be worth 40% more because it pays one.