Companies oftentimes use dividends as a reward for patient investors so they can show their appreciation for sticking by them in good times and bad. In the case of the New York Times, the payout is designed to help investors forget about the company’s misery.
The Times is a great and sometimes flawed news organization. As a public company, it’s simply pitiful. About the only way the shareholders get any justice from the controlling Sulzberger family is through the dividend. Think of it like beggars getting crumbs off the king’s table. Now, even that pittance of 31 cents a share may be in jeopardy
According to Bloomberg News, NYT faces increased pressure to cut its dividend because its credit quality is deteriorating along with its business.
"The extra yield investors demand to own New York Times bonds instead of U.S. Treasuries has more than doubled in 2008," the news service says. "The cost to protect the debt against default has climbed 27 basis points since the newspaper publisher posted earnings July 23, meaning investors are betting that credit quality will weaken further."
Moody’s Investors Service says New York Times may have to reduce its $132 million dividend payout to preserve its investment grade debt rating, You have to wonder whether the company should suspend its dividend entirely and put the money back into the business.
As Bloomberg notes, McClatchy (MNI), architect of the disastrous Knight-Ridder acquisition, has put its dividend policy under review and Gannett (GCI), considered at one time to be the best-managed publisher, skipped its annual increase for the second time in 41 years.
The logic of the Times continuing to pay a dividend that is the second highest among media companies until you remember that it’s a family company.
Bloomberg estimates that the Sulzberger’s 19 percent equity stake in the New York Times will entitle it to a $25 million payout this year. That’s quite a nice premium to get as the other shareholders continue to suffer.
Jonathan Berr
Get Ready To Retire (Sponsored)
Start by taking a quick retirement quiz from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes, or less.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Get started right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
