Thursday, 27 December 2012

Glacier Media - 2012 Q3 Update

After accounting for one-time items, and the seasonality of the assets acquired last year from Postmedia, Glacier Media posted solid results in the third quarter.  The company's focus on local newspapers, as well as business and trade publications that consumers are willing to pay for, means that it's largely able to escape the pressures suffered by larger papers that compete infinite alternatives, many of them free of charge.  Still, the soft national advertising market in Canada has some effect on Glacier Media, as it has all year.
Glacier has a glowing opportunity to create value for shareholders over the next few years, even in the absence of any new acquisitions.  With $131 million, or $1.47 per share in net debt ($27 million of it's non-recourse), management can add significant value simply by paying it down.  In addition, the company intends to repurchase shares, and increase the dividend over time.  In fact, management offered a fairly strong hint that a dividend increase is forthcoming, noting that the topic will be addressed in early 2013. 
At today's payout level of $0.06 per year, Glacier Media's stock offers investors a dividend yield of about 3.5%, significantly higher than the market's average yield, which has long stood at about 2%.  If the dividend were increased even to $0.08 per annum, the yield would jump to 4.5% at the current share price.  Given the general wariness about newspapers and similar content, it's possible that Glacier Media will behave more like a trust than a stock, with significant income, but less than dramatic share price performance.  No matter: for a company that throws off $0.40 or so in free cash flow, there's ample room to increase the dividend; shareholders that reinvest the dividend will do well over time.  And eventually stellar performance will surely mean some upward movement in the stock price, too.
My original analysis of Glacier Media is here.

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