Does the beautiful game offer beautiful returns?

It's easy to see why: football is enormous business. According to Deloitte's most recent Annual Review of Football Finance, the 20 clubs in the English Premiership, the world's most moneyed league, are expected to bring in a total of £3.3bn in revenues this season. And yet, these teams struggle to make a profit and are often highly debt-laden, given the pressures to fund enormous player salaries and transfer fees.

But despite football's financial woes and its domination by private owners, there remain a number of options open to retail investors (or fans) looking to take a stake in a club. In 2002, following a string of public offerings by UK and European clubs, and in anticipation of further floats, Stoxx created the first ever Europe Football Index, tracking quoted clubs. Many of the index's original constituents have since delisted, but the index now comprises 23 teams in Europe, including Italian heavyweights Juventus, Roma and Lazio, Holland's Ajax and Turkish champions Fenerbahce.

No fund has ever been set-up to track the index, though if one had been, it would have delivered a negative return. "The index has been relatively flat, and is down over the 10 years by a couple of per cent," says the head of product development at Stoxx, Christian Bahr. "The dividend yield is also extremely low, on average less than 1 per cent," he adds. Few clubs pay a dividend at all.

DJ Stoxx Football Index - propping up the league

One standout performer is Borussia Dortmund (DE:BVB), the only publicly traded German club, and in the last four years a regular contender for the Champions League and domestic Bundesliga titles. Off the pitch, the club's shares have also performed well in that time, and currently boast a 2.6 per cent dividend yield, a price/earnings ratio (PE) of 20, and a net profit margin of 4.7 per cent. Dortmund, which has a strong track record in developing players it later sells at a premium, has also consistently been run at a profit. Excluding dividends, the club's share price has had a three-year compound average growth rate (CAGR) of 22 per cent.

But profitable football clubs like Dortmund are something of an outlier. The main difficulty for large football clubs hoping to transform their considerable turnover into profit is the need to pay spiralling player salaries, which now swallow 71 per cent of the average Premiership club's revenues. Increasingly, big clubs are forced to compete for - rather than develop - player talent.

"As soon as a football club makes any money there's a lot of pressure to pay for new players," comments one broker who has acted as a nominated adviser to an Aim-traded club. This cash drain discourages investors from entering the sector. "The market for players is actually quite efficient in the sense that the more expensive your squad, the better you are likely to perform. But this puts a huge premium on spending your way to success."

The application of human capital may be relatively efficient, but sport's inherent unpredictability, arguably one of its great attractions, does little for the investment case. This factor, along with the potential erosion of a club's brand value and share price as a result of under-performance on the pitch, act as disincentives for investors. "Part of the risk for investors is sport is ultimately about matches and doing well in games," adds Deloite's Paul Rawnsley, co-author of the report.

Manchester United (NYSE:MANU), perhaps the most successful global football brand in the past twenty years, is a case in point. The club's poor performance in the past two years has made the share price highly volatile since it listed in New York in August 2012. At $16 (£10.50) a share, the club is currently trading at 14.6 per cent above its IPO price, which it has remained above since the beginning of 2013. But the shares show little prospect of sustained growth and do not pay a dividend. The club is no longer seen as a shoe-in for silverware, sidelined from the lucrative broadcast income of Champions League football, and has adopted an expensive transfer market strategy. An eye-wateringly high PE ratio of 70 reflects a steep fall-away in net profitability in 2014.

Since Tottenham Hotspur's delisting in 2012, the only two UK clubs left in the Stoxx index are 'Old Firm' duo Celtic (CCP) and Rangers (RFC), both of which are traded on Aim. It is possible to own shares in Arsenal Holdings - the holding vehicle of the profitable Premiership club - but they are currently changing hands on ISDX at a prohibitive £15,000 a pop.

At 24.6p, Rangers, which was this month the subject of a takeover bid by US businessman Robert Sarver, is a cheaper option, and trading at a steep discount to its net asset value. But the club is facing multiple problems, including managerial issues, a weak squad and a boycott by fans. With hardly any cash, it is also in the teeth of insolvency. So a contrarian play, based on its significant brand value being tapped, would be unwise. Celtic, which has a market capitalisation four times that of its Glaswegian rival, has delivered growth but its revenue generation is heavily reliant on its ability to qualify for European football, which it failed to do this year.

One potential good piece of news in all of this is UEFA's introduction of Financial Fair Play rules, which limit the losses clubs can make. But while the objective may be to make competition fairer and reduce the risk of insolvency, it is unlikely to shift football club financial management from its current focus on breaking even.

For investors who want exposure to football away from clubs themselves, a good punt would be on Goals Soccer Centres (GOAL), the operator of 44 five-a-side venues around the UK and California. The company is in growth mode, eyeing further centres in Los Angeles, Manchester and Doncaster this year, and is yet to reap the benefits of a newly launched app, which the company expects to significantly boost sales. Broker Canaccord Genuity foresees a substantial re-rating, and a 13 per cent increase in earnings per share (EPS) this year and next.

If there is anyone who makes money from football, it is players and by extension, their agents. Aim-traded athlete agency and marketing group TLA Worldwide's (TLA) decision to step into football was recently marked by a successful bid to host and run the International Champions Cup for the next four years, which the company expects to add materially to turnover and profit.

IC buy tip and FTSE 100 advertising and public relations giant WPP (WPP) acts for a raft of football clubs and organisations, including FIFA, UEFA, the Premier League, La Liga and Manchester United. Unlike the latter, WPP has a strong record of a returning cash to shareholders, and is well-placed in a consolidating industry.

Back of the net returns - and own goals

Source: S&P Capital IQ

IC VIEW: Football clubs may sit in a highly revenue-generating industry, but they also operate a business model which is unprofitable, riddled with politics, and ultimately subject to the wild winds of player fortune and performance. For retail investors, it is a sector to avoid, with perhaps one or two exceptions in the European leagues. In the words of one broker: "It's quite a lot easier to get one individual to take 51 per cent of the equity than it is for someone to take 49 per cent; it's all about being able to say 'I own this'." Leave the jostling to the multi-millionaires and look for the stocks which can turn football's popularity into profit.