CBS Corporation (NYSE: CBS) lost money in the third quarter (to see the data, you can click here to link to a pdf file). The loss was huge. Would you believe the red ink was equal to $18.58 per share from continuing operations? If you're a shareholder, you're probably shuddering at this point. But hold on, we're talking loss from a GAAP point of view. On an adjusted basis, excluding various charges (including the effect of the CNET purchase), CBS took in $0.43 per diluted share from continuing operations. According to my earnings preview, analysts were looking for a number around $0.40 per share. That's more like it. Yet, there's another angle to the CBS story that won't be so reassuring. And that angle has to do with cash flow.

You see, CBS really promotes its dividend. For a dividend to be considered safe and strong, it needs to be backed by free cash flow. Well, during the third quarter, CBS produced no free cash. It used $38 million for its corporate activities. Before anyone panics, management was quick to point out that, for the nine-month period, free cash flow was a positive $1.4 billion. CBS paid out about $524 million in dividends. So, that should allow for some comfort. Still, for a company that likes to base itself on returning value to shareholders, that does give me pause. Yes, it's only one quarter, but we are stuck in an awful economy right now, and the advertising outlook seems pretty challenged going forward. The Wal Disney Corporation's (NYSE: DIS) ABC, General Electric Company's (NYSE: GE) NBC, and News Corp.'s (NYSE: NWS) Fox are all in the same boat. Management does explicitly state in the earnings release that it's going to keep a strong eye on costs. I hope so. I also hope it'll keep a strong eye on the ratings of its television shows and continue to look for programming that can keep the cash coming. CBS has done well during the opening weeks of the new season.

Can CBS' content win the day and justify the stock's current yield? That's the big question. Since CBS' stock sports a yield of over 11%, the market is basically saying that bad things are to come. But, if management can sustain the dividend, then the yield can be considered a huge asset at this point. I'd be willing to give CBS the benefit of the doubt over the long term, but if you're thinking of trading the stock, I'd have a firm exit strategy in mind and use a tight stop. Wall Street has been in a very fickle mood lately, so anything can happen to stock prices at any moment. Executive chairman Sumner Redstone is very confident in the company. I'm not sure how big an endorsement that is, but it's something, at least, right?

Disclosure: I own Disney and GE; positions can change at any time.