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Skeptics about dead-tree media organisations will find their views confirmed by New York Times Company's stock chart. Shareholders in the company that owns the U.S. newspaper of record have received a five-year total return of zero. Mid-cap stock indices – NY Times Co's market capitalisation is $1.9-billion (U.S.) – are up by two-thirds.
NY Times Co's financial statements are not as dreary. For five years its operating margin, adding back depreciation, has been steady at between 13 and 15 per cent. Its return on capital is in the high single digits. Its profits have been steady for the past few years, too.
The company's second-quarter results, released on Thursday, showed trends not unfamiliar to other elite print brands that are busy recreating themselves digitally. Its sales declined slightly as rising circulation revenues failed to offset falling advertising dollars. Digital advertising is not growing at anywhere near the pace of digital subscriptions. Indeed, digital advertising sales fell slightly from the year before. They make up just a quarter of ad sales.
NY Times Co's management could signal its confidence in the sustainability of the business by paying a dividend. The company generated enough free cash flow last year – $44-million – to pay a dividend that would give the stock, at its current price, a 2.5 per cent yield.
One reason the company might hesitate to splash the cash is its pension plans, which were underfunded by an estimated $700-million at the end of last year. It says that this number has fallen nicely since, but it is worth noting that (again as of the end of last year) it was expecting the long-term returns from its pension plan assets to be 7.85 per cent. With interest rates still near historic lows and peaky equity valuations, that is a number skeptics can really dig into.