WWW- New Frontier Media (Nasdaq: NOOF), a company dedicated to supplying adult entertainment, reported fourth-quarter earnings Tuesday. Unfortunately, they weren’t so alluring. The company booked $0.07 per diluted share, a 50% drop compared with last year’s Q4.

Revenue did jump 10%, however, and there were some charges affecting the results, including reserves for taxes and litigation. The company was a victim of sorts to the tax man, as the 2006 quarter benefited from net losses; the effective tax rate jumped to more than 46% this quarter versus 25% a year ago.

From the release, one sees that New Frontier Media’s operating segments performed rather poorly. Pay TV was down because of a transition to a new licensing arrangement, and the Internet segment wound up with an operating loss on a slight decline. The only positive news came from video-on-demand revenue. All that said, I can understand the market’s reaction Tuesday — the stock eventually closed down more than 3%.

This media business might deal with hot, sexy entertainment, but this quarter was anything but. The full-year earnings growth was nothing to shout about, either. There is hope, though.

Interestingly, New Frontier Media actually shares some of its wealth with shareholders. Unlike other adult-entertainment ideas such as Playboy (NYSE: PLA) and Rick’s Cabaret (Nasdaq: RICK), New Frontier Media does have a dividend policy. According to the corporate website, the company plans to pay, semiannually, 60% of its free cash flow back to its investors (it had paid a special dividend of $0.60 per share). That’s pretty cool, and I think it’s a nice differentiating element.

Nevertheless, because the earnings report was lukewarm, I personally would hold off on beginning an investment here. I’d like to see more data in future quarters to see how the cash flow situation shapes up, and therefore the dividend prospects. There’s no question that adult entertainment will be with us forever, and that it should grow over time. Will New Frontier Media be the way to play this entertainment genre? Stay tuned.