And think about this: DJ has the same revenue today as it did in 1993. Does News Corp.? Do you? Does anyone? Even the minimum wage has gone up since then (with devastating effects on the economy, as I’m sure my friends on the Journal’s editorial page would agree).
Directors, by the way, have a fiduciary duty—a legal duty of trust—to look after the long-term financial health of a public company, not any particular group of shareholders, yachtsmen, lawn bowlers, or Pimm’s cup drinkers, but the whole company. The Audit believes Dow Jones directors in particular have an added responsibility to business journalism to forgo current income to invest in the business to protect the long-term health of the company.
In 2006, the company posted net income $387 million and paid $83 million—a dollar per share—in dividends. And that was an unusual year. The year before it posted net income of $60 million and the year before that of $100 million. The dividend paid each year has remained the same.
Hoffman argues that another metric—earnings before interest, taxes, depreciation, and amortization—should be used, and that DJ’s dividend policy has allowed the company to provide a return to shareholders while providing plenty of cash “to invest when and how we want.”
Okay, but why exclude interest and taxes, which must be paid every year, and capital costs, which have to be paid eventually? And by any measure, DJ’s dividend is high.
Besides, I’m afraid on this question The Audit has the advantage of hindsight, and mine’s 20/20. Whatever the policy was, it hasn’t worked to protect the company.
The dividend has been at the same rate since 2000. That’s $500 million right there, and the dividend was in that range throughout the critical 1990s, when News Corp. was an upstart and Dow Jones was a powerhouse.
Who does that help?
If you own 344 shares of DJ stock, like The Audit, that dollar per share is worth … let’s see, scribble, scribble, divide by pi, carry the two …. $344 a year! Wow.
If you are the Bancroft family and own about 20 million shares, that dollar is worth $20 million. There are thirty-five Bancroft shareholders; that’s $571,000 a year each. Not much by The Audit’s standards, but it’ll pay the kennel club dues.
It also puts in perspective—to say the least—the paper’s tough stand on welfare, food stamps, the value of work, how awful it is for one’s self-esteem to get a check every month for doing nothing, etc.
I guess it’s different if the check comes every quarter.
By the way, The Washington Post Co., which also publishes a newspaper and is controlled by a family, has significantly outperformed Dow Jones. It pays a dividend at a fraction of the rate of Dow Jones’s. In 1984, The Washington Post Co. bought Stanley H. Kaplan Educational Centers. Terms weren’t disclosed but I bet it was less than seven years’ worth of DJ dividends. Today that division produces $1.7 billion in revenue, about a third of the Post’s total, and $130 million in operating income—more than all of DJ’s in some years. Those liberals clearly don’t know a thing about capitalism. Maybe the Post should hire a few Journal editorial writers to help run the business side. I hear they have some excellent theories.
Still, you don’t see press barons making unsolicited bids for the Post. Warren Buffett is on the Post’s board. Who does DJ have? I’ll get to that in another post, too.
Think The Audit is brilliant? I’m not. Someone smarter than I am called with the idea. But he wasn’t the only one who’s been thinking about the question, which has come up periodically over the years. (see: “Dow Jones Dividends Questioned,” The Washington Post, March 12, 1997)
In fact, check out this guy quoted last Friday in The New York Times, talking about Dow Jones.
“A year ago, they made $81 million after tax and paid $80 million in dividends,” he said, “and you can’t grow a company that way.”
The speaker? Rupert Murdoch.
Crikey, Bruce! Blow that out your didgeridoo. But what’s the lesbian angle, mate?
By the way, the Times’s parent, of which I own 100 shares at $35, has raised its dividend 39 percent since last year. And while Times company spokeswoman Catherine Mathis argues that shareholders in mature industries need to be rewarded for their patience, The Audit says: the clock is ticking