The New York Times Company Severely Cuts Dividend, Pot of Wealth for Sulzbergers; Analyst: ‘It Was Inevitable’

As has been speculated for about month, The New York Times Company has severly cut its dividend—the pool of money it hands out to its shareholders, including about $25 million to the Sulzberger-Ochs clan—from $.23 -per-share to $.06-per-share. That’s about a 75-percent cut for what serves as one of the biggest sources of income for the entire family.

"This was a difficult but necessary decision that will provide us with greater financial flexibility in these uncertain economic times," said Arthur Sulzberger Jr., chairman of the company, in a statement.

The trustees of the Ochs-Sulzbergers sent out a statement supporting the decision and said that while it will be "very difficult" for its shareholders, the decision "serves the best interests" of the company. In other words, they’re sending a message: We won’t force Arthur Jr. to sell the paper because we’re about to lose money. They released the following statement:

The trustees of the Ochs-Sulzberger Trust believe that the decision of the Board of Directors to reduce the dividend serves the best interests of The New York Times Company and all of its shareholders. The Trustees recognize that while this is very difficult for all shareholders, it is the appropriate and prudent business response given the extraordinary challenges of the current economic environment. The Trustees remain unanimous in their commitment to the editorial integrity and independence of the New York Times.

"It’s a big cut," said Edward Atorino, an analyst at Benchmark who watches the Times Company. "That’s a 75 percent cut. I thought they’d do it in half."

The Times reports that it will save the company nearly $100 million over a full year.

"It was sort of inevitable," he continued.

This has no doubt been put into action because, yet again, Times Company stock tumbled again and closed today at $5.72 (only three cents above its 52-week low of $5.69, which it hit earlier today). Its market cap is now–remarkably–only valued at $822 million.

The company also unveiled its October revenue results, and it’s only more bad news. Ad revenue is down 16.2 percent year over year, continuing operations is down 9.4 percent year over year (circulation revenues increased 3.9 percent).

To help explain the implications of the cut, here’s what Joe Hagan said about it in New York magazine several weeks ago:

In order to keep the family—and shareholders—happier in these lean financial times, Sulzberger has quietly ramped up the amount of cash they receive in a quarterly cash dividend. This, more than the sale of stock, is the source of the Ochs-Sulzbergers’ working wealth. Sulzberger and CEO Janet Robinson raised the dividend by an extraordinary 31 percent last year—even as the stock price declined. Of the $132 million a year the paper gives to shareholders, about $25 million of it now goes directly into the coffers of the Ochs-Sulzberger trusts.

But the payoff exacts a harsh price: The company is going deeper into debt to pay the high-yield dividend. In the last four quarters, the paper has made less money than it has paid in dividends, and debt-ratings agencies like Moody’s and Standard & Poor’s are threatening to downgrade the company to “junk bond” status, which would paralyze the paper’s ability to borrow money. In August, an analyst for Moody’s suggested the company could quickly improve its rating by lowering the high-yield dividend—a report that sent the stock down 6 percent.

The New York Times Company Severely Cuts Dividend, Pot of Wealth for Sulzbergers; Analyst: ‘It Was Inevitable’