Gannett Co. is slashing the dividend on its stock for the first time in its history as the largest U.S. newspaper publisher finally succumbs to the financial squeeze that has triggered similar moves by its cash-strapped brethren. Gannett will save about $325 million annually with the move.
Gannett Co. is slashing the dividend on its stock for the first time in its history as the largest U.S. newspaper publisher finally succumbs to the financial squeeze that has triggered similar moves by its cash-strapped brethren.
The McLean, Va.-based company said Wednesday that the quarterly payment will fall to 4 cents per share, a 90 percent drop from 40 cents — a level that had been maintained since October 2007. The dividend had steadily increased since Gannett made its first quarterly payment more than 41 years ago.
With the reduction, the dividend will now be a penny lower than when Gannett made its first split-adjusted payment of 5.4 cents per share in October 1967.
Gannett will save about $325 million annually with the move, but it may give investors one fewer reason to hold on to the company’s sagging stock.
Before the reduction, the dividend yield — which is the annual dividend divided by the price of the stock — stood at about 40 percent. The yield now computes to 4.3 percent, based on Wednesday’s closing stock price of $3.75.
The shares shed 23 cents, or more than 6 percent, in extended trading, after closing earlier down 33 cents, or 8 percent.
The dividend will be paid on April 1 to shareholders of record as of March 6.
The decision to lower the dividend rate wasn’t a shock, although the magnitude of the cut may have jarred investors.
Since Gannett’s management acknowledged the possibility of a reduced dividend last month, the increasingly bleak outlook for the newspaper industry made a decrease seem inevitable.
As an advertising drought dries up the main source of revenue for newspapers, more publishers are scrambling to conserve cash – a pursuit that is erasing dividend payments. McClatchy Co., Media General Inc. and The New York Times Co. are among the major publishers that have decided to eliminate their dividends since the end of 2008.
Gannett, which owns USA Today and more than 80 other daily newspapers along with television stations, had been able to maintain its dividend for a longer time than its peers because it has done a better job of managing its debt load, which totaled $3.8 billion at the end of 2008.
Nevertheless, Gannett has been stung by the worsening slump in advertising as the recession causes more ailing companies to pull in their marketing reins. In the fourth quarter, Gannett’s advertising revenue plummeted by $283 million, or 23 percent. The erosion contributed to a 36 percent decline in its fourth-quarter profit.
The lower dividend “is another prudent response to the full-fledged recessions in the U.S. and (United Kingdom) and the continuing difficulties in the credit markets,” said Craig Dubow, Gannett’s chief executive.
To prevent its profits from plunging even further, Gannett laid off thousands of workers last year and started off this year by requiring most of its U.S. employees to take unpaid furloughs of one week by April.