With its stock beaten down to around a buck, Entercom’s cash dividend of 10 cents per quarter – 40 cents per year – had produced a humongous yield of 40%. No more. After the market close yesterday, the company announced that its board of directors had suspended the dividend payment “in light of the difficult business environment and the uncertain outlook for the US economy.” Entercom reported that its Q3 same station revenues were down 7%, but Q4 is pacing down in the mid-teens.
“Since we initiated dividends in 2006, we have paid a total of $3.62 on each share of stock,” CEO David Field noted in his conference call with Wall Street analysts. A little quick math by RBR/TVBR finds that you could almost buy three shares of Entercom with that dividend cash at yesterday’s closing price of 81 cents. “Our business model continues to generate an enormous amount of cash and we’ve concluded that there are more compelling uses of our free cash flow than a shareholder dividend,” he said.
“The dramatic decline in our company’s stock price over the past few months has been, in a word, stunning. We recognize that the market has punished a great number of good companies, particularly those in industries that they believe will suffer in a challenged economic climate. But frankly, we believe that the market has discounted our stock somewhat indiscriminately, placing us in the same penalty box as a number of other broadcasters and other businesses with leverage significantly greater than ours,” Field said. He noted that so far in 2008 Entercom has cut its debt by $99 million and that its leverage declined to 5.3 times and its interest coverage ratio is 3.4:1. Entercom is not facing any refinancing problem, since its current bank facility doesn’t mature until 2012.
Q3 net revenues were down 6% to $115.6 million. On a same station basis, the decline was 7%. EBITDA decreased 15% to $39.4 million. Adjusted net income per share remained flat at 39 cents and the company said free cash flow was down only 2% to $28 million.