CBS’s diminished dividend a surprise


Just about everybody expected CBS cut its dividends, but reducing quarterly checks to shareholders by about 80% seemed to catch most analysts by surprise. But the move will keep valuable cash at hand during a difficult year. If there are prospects for a turnaround in advertising-based businesses, they aren’t seeing it on Wall Street. The reduction in dividend from 27 cents to five cents quarterly is expected to conserve a cool $600M.

"CBS’s long term debt ratings will likely be weakly positioned in 2009 but the ratings and stable outlook are unaffected at this time by the expected continued weakness in several of the company’s core ad based businesses," said Moody’s Neil Begley, who approved of the dividend cut. "The prudent response to the severe weakening in the economic environment will ease liquidity concerns amid growing uncertainty in credit markets," he observed.

According to Moody’s, television comprises 64% of CBS business, followed by outdoor (16%), radio (11%), publishing (6%) and interactive (3%).

Barclays Capital observed that CBS is going to require drastically improved conditions in the advertising business to really get going again, a turnaround which is obscured by lack of visibility and compromised by outside factors such as DVR and online usage.