Checking the stats at McClatchy
The News & Observer’s parent company, McClatchy Newspapers, will announce its second-quarter results later this week, so it seems like an appropriate time for a between-innings glance at the scoreboard.
McClatchy’s stock price has repeatedly set new 52-week low points in recent months, hitting the latest one of $4.46 last week before finally rising to $4.61 on Friday. A little over three years ago, McClatchy’s stock was trading above $74. And even this most recent price might be the product of some market sleight of hand to keep it higher than it otherwise would be. More about that in a moment.
At the end of trading Friday, McClatchy’s market capitalization — which is to say, the collective value of all its outstanding shares - was $379 million. To give you a little perspective, that’s almost exactly the price McClatchy paid for the News & Observer in 1995. What a single medium-sized paper fetched in the marketplace 13 years ago is today what all the publicly traded stock of McClatchy, which owns 30 daily papers, is now worth. That fact alone tells you much about the state of the newspaper industry these days.
In fairness to McClatchy, though, market cap is a slippery indicator. The company’s actual value is much higher than that. The real estate its newspapers occupy alone is worth hundreds of millions of dollars, for instance — a fact that caused one writer to suggest that McClatchy consider selling or developing its land holdings to shore up the balance sheet. But the implication behind that suggestion is that McClatchy is nearing the point where its break-up value may be greater than its worth as a business operation.
The item on McClatchy’s balance sheet that attracted the most attention last week, however, is its dividend yield (the amount of money returned to stockholders every quarter as compared to the stock price). Dow Jones noticed that some beleaguered newspaper chains — a redundancy, really — had puzzlingly high dividend yields, with McClatchy near the top of the pack. Why would companies that are struggling with revenue problems offer such big yields to investors? As one analyst told Dow Jones:
“It’s highly unlikely they would want to cut the dividend at this point because of the further negative impact it would have on the share price.”
In other words, McClatchy’s stock price might be even lower were it not propped up by its 15 percent dividend yield.
There’s another reason for that high yield, as both Dow Jones and the Columbia Journalism Review pointed out: McClatchy, like some other newspaper companies, has a two-tier stock system that keeps voting control of the company in the hands of the founding family. Ostensibly, it’s a device by which the company can be made immune to the demands of Wall Street. I never bought that explanation, which is why I didn’t invest in McClatchy stock even when I could have gotten it at a discount as an employee. It struck me as a system engineered to make the family’s interests top priority, with investors a distant second.
Columbia Journalism Review said as much last week when writing about McClatchy and the New York Times:
But the families that control the voting shares of the companies depend on the dividends to support their lifestyle, putting them in a Catch-22: Give up the private jet or milk their cash cows dry.
In three days, we’ll get an idea whether McClatchy’s controlling clique is willing to give the cow a rest.