Dividends go the way of the dinosaur
Belt-tightening also hits stock buybacks, real estate dealsNEW YORK -- Sometimes it pays dividends not to pay a dividend.
Amid a financial crisis and an economy on a recession course, media and entertainment companies are in across-the-board belt-tightening mode. Beyond select layoffs, some sector players have started to preserve cash in a challenging environment by cutting back on dividend payments, stock buybacks and even real estate deals.
Case in point: movie exhibitor Carmike Cinemas, which recently suspended its dividend that amounted to $9 million annually.
"Due to recent economic and capital market uncertainties, the board of directors ... suspended the quarterly dividend in favor of directing surplus cash to debt repayments," CEO Michael Patrick said. Management later added that the dividend wouldn't come back in the foreseeable future.
That followed a September decision by small radio group Beasley Broadcast that reduced its quarterly dividend from 6.25 cents per share to 5 cents to free up additional funds for credit facility repayments.
Among major media and entertainment companies, CBS Corp. has been the object of dividend concerns amid the current environment, with analysts repeatedly suggesting a possible cut.
However, the company announced Thursday an unchanged quarterly dividend. And president and CEO Leslie Moonves in his latest earnings conference call shrugged off worries. "Our strong year-to-date free cash flow of $1.4 billion enables us to strategically invest in our businesses and is more than sufficient to pay our dividend," he said.
Big stock buybacks also have gone out of vogue amid an uncertain future.
For example, News Corp. chairman and CEO Rupert Murdoch recently poured cold water on investors' hopes for a major new stock buyback. "We don't want to do anything until we can see that there is a great deal more visibility in the market," he said after his firm's latest earnings report.
Comcast used the same occasion to say that it is slowing down buybacks to conserve cash because of "the overall economy and the unprecedented turmoil and instability in the capital markets." As of the end of September, the cable giant had $4.1 billion left under its current buyback authorization and it said it might not finish that in 2009 as previously planned.
Satellite TV operator Dish Network also recently said that it repurchased $82 million of its own stock in the third quarter, with management admitting that likely was a mistake amid the current credit market. "We would be surprised to see Dish repurchase any more of its own stock for the foreseeable future, given the difficult credit environment and its relatively tight liquidity position," Credit Suisse analyst Spencer Wang said.
Even real estate can be an area of savings as Martha Stewart Living Omnimedia CFO Howard Hochhauser demonstrated in pointing out a particularly creative cost move in his company's latest earnings call.
"As part of our cost-reduction efforts, during the quarter we also signed a sublease agreement, which will allow us to reduce corporate overhead by approximately $1 million on a run-rate basis," he told investors.