Belo dividend boost seen as last for a while


BeloWells Fargo Securities analyst Marci Ryvicker had correctly predicted that Belo Corporation would increase the cash dividend it pays to shareholders. Now that the boost has become reality, what does the analyst think lies ahead?

“We believe that this increase ‘is enough’,” Ryvicker said in a note to clients. “BLC amended its credit facility on 12/22, removing prior restrictions on capital returns, which led some investors to believe that a dividend announcement would occur on the company’s Q4 earnings call (2/7). When this did not happen, there was some investor doubt that a significant dividend increase was coming some time soon. In light of this, we view today’s announcement as a positive surprise and would anticipate the stock to rise.”

Well, maybe soon. Belo’s stock price rose in Friday’s early trading, but it was dragged down by the down market to end the session down a few cents. So, the attractive dividend yield of over 4% is still there for the taking.

Since Belo’s ability to return capital to shareholders is spelled out in the new credit facility it announced in December, Ryvicker provided some details of that new deal the compay cut with its bankers.

“The new credit facility allows up to $100MM in capital returns in any fiscal year subject to a leverage restriction of 4.5x, which is an increase from the roughly $30MM in dividends that were previously allowed. We note that 50% of this $100MM gets rolled over in the subsequent year if not used, while the other $50MM is a ‘use-it-or-lose-it.’ BLC is allowed discretion with how this $100MM basket is spent, in the form of either cash dividends or share repurchases; while under the previous credit facility, BLC was limited to roughly $30MM in dividends (share repurchases were not allowed),” the analyst explained.