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Market Bullish on NY Times Dividend

Zacks Equity Research

Market reacted positively toward The New York Times Company (NYT), as its shares rose 1%. This comes within a day of the announcement that the company is restoring its quarterly dividend, which it suspended in Feb 2009 citing recessionary headwinds. We believe the stock would gain further momentum in the days ahead.

The diversified media conglomerate will now pay a dividend of 4 cents on Oct 24, 2013, to all shareholders of record as of Oct 9. It is evident that the financial flexibility and healthy balance sheet facilitated The New York Times Company to ponder over the reintroduction of the dividend. At the end of the second quarter of 2013, the company had cash and marketable securities of about $918 million, and total debt and capital lease obligations of approximately $694 million.

Earlier, this Zacks Rank #3 (Hold) company had lowered the quarterly payout to 6 cents a share in Nov 2008 from 23 cents before the suspension of the same.

Tough economic conditions along with softness in advertising demand have been weighing upon the company’s performance. Consequently, the company has been trying every means to shield itself from the impact of an unstable market and has been contemplating new revenue generating avenues.

The New York Times Company has been realigning its cost structure and streamlining its operations to increase efficiencies, and in turn the operating performance. The company is also offloading assets that bear no direct relation to its core operations.

The New York Times Company completed the sale of Regional Media Group in Jan 2012 to re-focus on its core newspapers and pay more attention to its online activities. The company divested its remaining stake (210 Class B units) in the Fenway Sports Group in May 2012. The company, in Sep 2012, completed the sale of About Group and sold its stake in Indeed.com in Oct 2012. The company in Aug 2013 also entered into a deal to sell its New England Media Group, including The Boston Globe and its allied properties to an acquisition company spearheaded by John W. Henry, who owns Fenway Sports Group.

The publishing industry has long been grappling with sinking advertising revenue. We observe that The New York Times Company’s total advertising revenue slid 5.8% in the second quarter of 2013. Print advertising dipped 6.8% during the quarter. Other publishing companies such as Journal Communications, Inc. (JRN), The E. W. Scripps Company (SSP)  and Gannett Co. Inc. (GCI) are also encountering a similar fate.

The New York Times Company has been adding diverse revenue streams, which include a circulation pricing model and a pay-and-read model to make it less susceptible to the economic conditions. Despite hiccups in the economy, what still guarantees revenue generation is The New York Times Company’s pricing system for NYTimes.com, which was launched on Mar 28, 2011.

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