Gannett, the biggest newspaper chain, has finally cut its dividend, and in a major way.
It’s a long overdue move that follows the New York Times, McClatchy, and others who have done so this year. Why do these things happen in clusters? These CEO’s are like pack animals under attack, afraid to make a move until somebody else is forced to.
This move will save Gannett $325 million a year, according to the AP, at a time when it really, really needs the cash.
Here’s what I wrote more than seven months ago:
For all of Gannett’s misery from April to June, it still posted a 13.5 percent profit margin, far below those famous (or infamous) margins of a few years ago that were about double that, but still a level that Wal-Mart (with 3.1 percent margins last quarter) or Toyota (4.8 percent) would love to have.
But Gannett’s dividend ratio is sky high. As of yesterday, one share of Gannett cost $17.24 but returns $1.60 in cash dividends to its holder annually. That’s a 9.3 percent yield.
To show you just how long seven months is in newspaper land these days, Gannett’s shares opened at $3.85 this morning and its dividend yield had jumped to 42 percent.
But Gannett will still pay sixteen cents a share to investors this year. Why? That’s about $37 million in cash in 2009—money it should be using to pay down debt, save for a rainy day, or invest in its business. This isn’t rocket science (The New York Times, at least, eliminated its dividend, saving $125 million a year).
Newspapers once were cash cows. They’re not now. They need to think of themselves as startup growth (I know, I know) companies. Those businesses don’t pay dividends until they have a viable business model. Newspaper companies don’t.
And they won’t for a while (if ever). This is going to be a long recession.
(h/t Romenesko)
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.