The New York Times Co. (NYT), one of the last ones standing in pure-play newspaper journalism, is reinstating its dividend after a five-year hiatus. Is the Gray Lady finally healthy enough to return some cash to long-suffering shareholders (including, crucially, the Ochs Sulzberger family, which controls the paper with its super-voting stock)? Or is this move another in a long string of financial blunders?
Consider: In 2004 the company sold its longtime headquarters for $175 million, only to see the new owner offload it for a cool $525 million just three years later. In 2006 it reportedly had the chance to sell the Boston Globe, which it acquired in 1993 for $1.1 billion, for at least $550 million; it finally sold the daily last month for just $70 million. In 2007, just in time for the financial crisis, the Times jacked its quarterly dividend by 31 percent—only to scotch it in February 2009 to save $35 million (the better to make annual interest payments on a high-interest loan it had to take from Mexican billionaire Carlos Slim).
Now, with shares up 37 percent this year, the balance sheet flush with cash from divestitures, and subscriber revenue surpassing its declining advertising revenue for the first time, management is kicking back a dividend of 4¢ a share, payable on Oct. 24.
“The strength of our balance sheet justified the restoration of a dividend,” Chief Executive Officer Mark Thompson said in a statement. “Given the expectation of continued volatility in advertising revenue and the fact that our growth strategy is at an early stage of development, we will maintain a prudent view of both the balance sheet and free cash flow.”
While the Times had cash and short-term investments of $747 million at the end of last quarter, vs. debt of $694 million, its controlling family has been starved of $20 million to $25 million a year in dividend payments since the end of 2008. If the new dividend holds at 4¢ a share, the family’s 13 percent stake in the Times would now throw off $3.1 million annually in dividends.
Which beats nothing, especially as their patience is tested amid open season for print divestitures. Time Warner (TWX) is planning to spin off its magazine division; the Tribune Co. is selling its newspapers; Amazon (AMZN) founder Jeff Bezos is taking the Washington Post off its parent company’s hands. The Times’ dividend news comes just weeks after chairman and scion Arthur Sulzberger Jr. emphatically declared the New York Times wasn’t for sale.
Will the quarterly payments keep the extended clan sated?
“Who knows?” says Edward Atorino, a media analyst with Benchmark. “Four cents is not a really big deal. Their options were to reduce debt, buy something, let the cash pile up, or pay some out. Management is family, so maybe Arthur was getting calls.”
Writes Columbia Journalism Review’s Ryan Chittum:
“The problem is, every dollar shuffled off to shareholders is a dollar that can’t be reinvested or socked away to secure the Times’s future. That’s a big reason why the Wall Street Journal fell into the hands of Rupert Murdoch. … If the [controlling] Bancroft family had taken, say, half of the cash out of the company that they did, Dow Jones would have had a quarter-billion dollars to play with from 2000 to 2007. Would that have made the difference? With its management, probably not, but it couldn’t have hurt. The same is true for the Washington Post Company. If it had invested in the Post with a fraction of the more than $1 billion it handed back to shareholders during the crisis, perhaps the Grahams could have kept the family jewels.”
Chittum points out that the New York Times’ digital advertising, “which should be one of the paper’s few growth opportunities,” declined in the second quarter for the second straight year—and argues there is only so much more revenue it can wring from its paywall.
The wild-card test of all this remains: What if some mogul lobs in a sweet unsolicited offer for the Times—like Rupert Murdoch did for Wall Street Journal parent Dow Jones—at a price its controlling family ultimately could not turn down?
How much will a nominal dividend then bind the Ochs Sulzbergers? The stock market, after all, is at an all-time high, while the family’s shares—the meat of their net worth—are down 75 percent in a little more than a decade.