Media Dividends, How about Dividon’ts

The pain being suffered this year by the U.S. banking system is all too familiar for another American institution – the media.  So, speaking on behalf of the Fourth Estate, welcome to the misery, guys.
It’s not really news that the American media, especially its print arm, has been in crisis mode for some time.  When it comes to billion-dollar bailouts, I’m certain there are more than a few newspaper publishers who would like a piece of that pie.  Newspapers have been slashing and burning staff for the past three years, as advertising has dried up and circulation has dropped faster than Lehman Brothers’ stock price.
But don’t shed too many tears yet for the media giants and their financial misfortunes.  Some of the major media companies – Gannett, Media General, The New York Times Company, McClatchy – had terrible second quarters, but still remain profitable and are still throwing around big-time dividends, according to a recent article in the Columbia Journalism Review.  Gannet, in fact, lost a tenth of its revenue from a year ago in Q2, but still posted a profit margin of 13.5 percent, which must leave other companies asking, ‘What are they whining about?’
In the financial clean-up package, Gannett, and others, should start by taking a look at their dividend yields.  Gannett’s dividend yield is 9.3 percent, Media General has a 7.4 percent rate and the NYT Co. is at 6.9 percent.  McClatchy’s was a whopping 14.7 percent, but executives wised up last week and announced they are cutting their quarterly dividend in half.
The question is, if newspapers are gasping for air, why are they returning all this cash to shareholders?  Well, the families that control the voting shares need a steady stream of income to afford another ivory back scratcher, so they are essentially bleeding their companies dry.  Maybe a more practical idea would be to eliminate these dividend payouts all together and use these hundreds of millions of dollars as the media’s version of a government bailout.


Ron Neal, Senior Associate,