The New York Times (NYT 1.99%) recently announced its first dividend in five years. At $0.04 a share and a 1.4% dividend yield, this new quarterly payout isn't monstrous by any means, but the venerable newspaper hasn't exactly been doing well on Wall Street recently, which makes the timing of this news seem curious. While a dividend, however small, can help incentivize a company's investors to stay on board, does the New York Times' new payout mean its stock could finally be on the upswing?
Shrinking the non-core
Over the last year, the Times has pocketed cash from steadily offloading a number of its non-core assets. The company sold its ownership interest in job search engine Indeed.com for $167 million in October 2012 after teaming up with Allen & Company and Union Square Ventures for a combined $5 million investment back in 2005, but that victory was small potatoes compared to the hits the New York Times has recently taken from selling other ventures.
After buying the About Group (the business behind About.com) for $410 million in 2005, the Times sold it in September 2012 for $300 million, waving goodbye to $110 million in the process. That loss looks like nothing, however, next to the paltry $70 million sale of The Boston Globe in August 2013, for which the Times had previously paid $1.1 billion 20 years earlier.
Looking at the books
While these investments might not have paid off to the Times' liking, the company nevertheless finds itself with $358 million in cash and equivalents, as of its June 30 10-Q, after ridding itself of these nonessential elements. Having some green on the books could feel like a breath of fresh air, but there are other metrics to consider before the Times can truly rest easy.
Since 2008, the New York Times has seen sales slide nearly 33%, from $2.9 billion to $1.9billion. However, on a quarterly basis, some margins are actually up from the previous year. Operating costs in June 2013 dropped 3.1% from where they were in June 2012, which helped increase the Times' operating profit by 21% from the same time.
Aye, but here's the rub. One reason for the boost in operating profit is a $1 million decrease in employee wages and benefits, likely helped by a group of 30 voluntary layoffs (or buyouts) in January 2013, which included several journalists who had been with the company since 1987. The Times' operations may be gaining more steam on paper, but that headway comes at the cost of its employees.
Payouts over pensions
Adding to the Times' tribulations are its woefully underfunded employee pension plans. As stated in the company's 10-K, 2012 saw an underfunding of qualified plans by $396 million. And that was an improvement from 2011's gap of $522 million.
The Times has promised to keep its eyes open for more opportunities to "make additional discretionary contributions" to pension plans, and has also said its decisions will be based on a number of factors, with cash flow being an important one. However, with the onset of a new dividend, the New York Times will pay an annual $24 million on quarterly payouts. That money could have gone to help make a dent in the pension gap, and prevent contract disputes and employee dissatisfaction that have recently plagued the company as a result.
Subscribe to this dividend?
In the beginning of August, after Jeff Bezos famously purchased the Washington Post, New York Times chairman and publisher Arthur Sulzberger Jr. emphatically declared that his publication was not for sale. Perhaps this new dividend is an attempt to further drive home that point to investors, and bring renewed faith in the company's business model.
As well-respected as the Times is as a publication, though, it's difficult for Foolish investors to ignore the facts: The company has lost money from several sales transactions, frustrated its employees, and now plans to spend cash on dividends while its revenue continues to decline. The Gray Lady might not be for sale, but that doesn't necessarily mean investors should buy its stock based on the merit of its new quarterly payouts.
