Capital Markets

What’s Black and White and Bled All Over?

Under pressure from activist shareholders, The New York Times hikes its dividend 31 percent.
Stephen TaubMarch 23, 2007

The New York Times Co., the target of an activist campaign by one of its largest shareholders, says it is increasing its dividend by 31 percent to 23 cents per share.

“This dividend increase, which is another important step in creating value for our shareholders, puts our dividend yield and payout ratio significantly above that of the S&P 500 and others in our industry,” said chairman Arthur Sulzberger in a statement. “The strong cash flow of the company and our current financial position, with the upcoming sale of our broadcast unit and radio station, give us the ability to return more capital to shareholders,” he added.

Sulzberger also acknowledged the media industry’s “extraordinary transformation” and promised to exercise strong financial discipline. Like most major newspaper companies, The Times has been struggling to maintain circulation and revenue growth.

Earlier in the week, the company announced that February 2007 advertising revenues from continuing operations decreased 6 percent and total company revenues from continuing operations decreased 3.6 percent compared with February 2006. In 2006 revenues rose just 1.6 percent.

In response to the dividend announcement, Standard & Poor’s placed the media company’s rating on CreditWatch with negative implications.

“The CreditWatch listing reflects a dividend increase at a time when the financial profile is currently weak for the rating,” said S&P credit analyst Peggy Hwan Hebard in a statement. “In addition, ongoing challenges within the operating environment have affected year-to-date operating performance, and the company has a heavy near-term capital expenditure plan.”

The company, meanwhile, is facing pressure from Morgan Stanley Investment Management, a large shareholder that has been trying to get it to rescind its dual-class share structure. In response, The Times has publicly defended its governance practices.

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