Now that Sinclair Broadcast Group has resumed paying dividends to its shareholders, what other broadcasters who suspended dividends during the recession might be eying a resumption? A report from Wall Street analysts mentions one TV group that might step up to the plate.
Bishop Cheen (pictured) and Davis Hebert at Wells Fargo Securities are high-yield bond analysts, but they have to keep an eye on what’s happening with the equity side as far as it impacts cash flows and leverage. They note that Belo Corporation is prohibited by its bank loan covenants from buying back stock, but would be allowed to pay out up to $8 million per quarter in dividends. Cheen and Hebert told clients they would not have been surprised if the company had announced a dividend resumption when it reported Q4 results, but instead management said it has no plans to renew them.
“We think management is trying to ensure that it does not need to lever up beyond a few decimals in 2011. If core advertising, Internet and retransmission revenue can replace a large chunk of absent political ad spending in the first half of 2011, we think management would be motivated to amend or to replace its credit facility before the year-end 2012 maturity with an eye toward renewing dividends as early as Q4 2011,” Cheen and Hebert wrote in their most recent analysis.
Belo Corporation announced suspension of its dividend payments in March 2009. It had been paying 7.5 cents quarterly, but that past rate is no indication of what the payments might be if and when the company resumes dividend payments.
RBR-TVBR observation: Dividends aren’t the primary reason most investors own stock. They’d rather see the stock price go up…and up…and up. But being able to pay a dividend does demonstrate the stability of a balance sheet and ongoing profitability. As the economy improves over the next couple of years we will likely see several media companies either resume dividend payments, increase dividend payments or even start paying dividends for the first time.
