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06/20/2012 11:15 am EST
USA Today publisher Gannett is using its ample cash flow to double its dividend and then some, for a current yield of more than 6%, says Joan E. Lappin of Gramercy Capital Management.
Steady as she goes for Gannett. We’re here with Joan Lappin to explain what she means by that.
Well, it’s a very interesting dichotomy right now. We’re in the middle of all the hoopla about Groupon (GRPN), Facebook (FB), and a number of these other social media companies that are either being bought by each other or trying to come public or whatever. And in the middle of all of this, my eye has been caught by Gannett (GCI), and you couldn’t get more old media than that company.
Early in my career, I was a media and entertainment analyst, and so I’ve probably kept an eye on Gannett for decades now. And the stock is no longer in the $80 to $90 range, as it was before everybody decided no one would ever read another newspaper.
But what’s interesting is you take a company like Groupon, which is growing rapidly and getting lots of advertising dollars from old media, but has no cash flow to speak of...and here’s Gannett trundling along publishing small city papers and so forth, and generating tons of cash.
What’s exciting to me is that, at this point in time, you have a circumstance where Gannett has just had a change of CEO, because the previous one became ill. The new one used to be the CFO, and is just terrific. And the decision was made in the early part of 2012 to increase the cash dividend from 32 cents a share to 80 cents a share, a 150% increase.
Now, that puts a delicious floor under the stock. That translates into almost a 6% yield.
In the meanwhile, Gannett is transforming itself, and already has about 25% of its revenues coming from digital, which people don’t realize. So, I believe that with the new CEO and with the new revenue streams and the ways they’re going to try to capitalize on their very well known USA Today brand name and their sports franchise, which is substantial already, that the future is not what people are anticipating for Gannett in that it’s going to be a lot better and brighter.
It requires patience, but that’s fine. In this kind of market, I’d rather have the 6% while I’m waiting than sitting in a Treasury that isn’t going to do much for me.
Sure, and it sounds like they’ve maintained their revenue stream, as far as their advertisers go.
I know recently there was just announced that GM (GM) was pulling all its advertising from Facebook, and that could be the end or at least a clarion call for some of these new social media companies that have relied on some of these big advertisers. And the statement is from GM that they’re not getting the bang for the buck with places like Facebook, but these reliable sources, it reinforces the value of something like Gannett.
Well, Gannett also owns a number of broadcast properties. Those will benefit from all the election spending we’re likely to see this fall. But also, in general, I think your GM reference is excellent because the big advertisers need lots and lots of eyeballs, and the traditional media are still the only ones that can deliver that.
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