New York Times Co. (NYSE:NYT), which today reported better-than-expected quarterly results, suspended its dividend in 2009. But now that things are looking up, the publisher should start issuing payments to shareholders again.
In an interview with Reuters, Evercore Partners analyst Doug Arthur noted that the company has a cash hoard of $431 million and that “they have to be the only company with this much cash not paying a dividend.”
NYT’s cash position improved by more than $150 million in the first quarter of 2012 from the fourth quarter following the sales of the Regional Media Group and 100 of the company’s units in Fenway Sports Group, which includes the Boston Red Sox.
Shareholders of NYT, who have seen the value of their investments drop more than 73% over the past five years, deserve some consideration for sticking with the company during some of its darkest hours.
Moreover, they could justifiably complain to Chairman Arthur Sulzberger that it’s unfair of NYT to not pay a dividend at a time when rival Gannett Co. (NYSE:GCI) hiked its payout by over 400% over a year ago. Unfortunately, Sulzberger, whose great-grandfather Adolf S. Ochs acquired the company’s flagship paper in 1896, hasn’t cared much about shareholders before and there’s little reason to suspect that will change.
To be fair, there are some signs in the latest earnings report that NYT’s fortunes are starting to improve, albeit modestly.
Net income increased in the latest quarter to $42.1 million, or 28 cents a share, versus $5.4 million, or 4 cents, a year earlier. Revenue fell 0.3%, to $499.4 million. When one-time items are excluded, profit was 8 cents, compared with 2 cents a year earlier. On that basis, Wall Street expected profit of 2 cents. Not surprisingly, NYT shares traded up on the news.
Paid digital subscriptions were a bright spot in the quarter, with a 16% gain at The New York Times and the International Herald Tribune since the fourth quarter of 2011 and a 13% jump at The Boston Globe and BostonGlobe.com. The rest of the NYT’s business wasn’t so good.
Total digital advertising revenues fell 10.3%, to $71.1 million, from $79.3 million, primarily due to lower revenues at About Group, where revenue plunged 23.1% because of lower click-through rates and advertising rates. Operating profit at About Group decreased 50.5%, to $7 million.
Print and digital advertising revenues at the News Media Group, which includes the Times and the Globe, slumped 7.2% and 2.3%, respectively, while operating costs rose 2%, to $452.4 million.
NYT has made progress in transforming itself into a digital enterprise. Indeed, its iPad app is is one of the best of any news organization’s that I’ve seen because, unlike other companies, NYT didn’t just regurgitate its newspaper on a tablet. The app is both dynamic and easy to use. Still, the company needs to do more.
New York Times Co., which has been without a CEO since Janet Robinson’s recent abrupt departure, has plenty of challenges ahead. A turnaround is still years away, which means the stock will continue to be volatile for a long while. That’s why Sulzberger should reward shareholders with the fortitude or foolishness to buy or hold stock in his family business.
Jonathan Berr does not own shares in any of the companies mentioned in this article.