The New York Times unleashed a slew of bad news earlier: ad revenue continues to plummet, the print business is in permanent decline, and the company is running on fumes. As a result, the Board is going to evaluate the company's dividend payout.
And well they should: the dividend costs the company $132 million of precious cash annually. However, that money is likely much of what is protecting the paper from being sold, as the increasingly extended (and fractured) Ochs-Sulzberger clan lives off the juicy dividend. From a recent New York magazine article:
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.
If the Times cuts its dividend, while at the same time admitting that the print business could be in a permanent decline, how many Ochs-Sulzbergers will sit around and watch their inheritance die? Wouldn't they instead begin agitating for a sale of the company? (Or at least become more open to one).
If the company cuts its dividend, it will shore up the balance sheet, but make it easier for someone like Rupert Murdoch or Sam Zell to swoop in with an offer to divide the family and the shareholders, forcing a sale.
See Also:
New York Times: September Awful, We Could Default On Our Debt
Our Offer For The New York Times Company
