Monday, December 05, 2011

Stock | GCI up 11% on dividend hike speculation

GCI shares traded recently for $13.24, up 11.2%, after Lazard Capital Markets upgraded its rating to a "buy" from "neutral" today, as the investment bank said it saw an increased chance Gannett would boost its dividend again. GCI has traded as high as $13.48.

Lazard said the company could increase its dividend to 64 cents a year or even 96 cents vs. the current 32 cents. "We believe the chances have increased based on cash build to begin in April, new financially astute chief executive and a practical example in the market (Meredith), which lights the path," Lazard said in a note to investors.

Lazard also said it expects GCI to climb to $16 a share, according to Barron's magazine's report on the investment bank's note.

The stock's rally comes in advance of Wednesday's annual UBS Global Media and Communications Conference, where industry executives update Wall Street on prospects.

GCI's advance was well ahead of the overall market: The Dow Jones Industrial Average was recently up 1.2% to 12,168, and the broader S&P 500 index was 1.7% higher at 1,265. Other newspaper publishers were higher, too, although few as much as GCI's.

'No shame' in high dividend
Lazard compared GCI to publisher Meredith, which announced a 50% dividend increase Oct. 26.

"There is no shame in paying a high dividend," Lazard's note says. "When a business is in decline, investors like to harvest cash, enabling them to make their own diversification decisions and taking major acquisition risk off the table." Practically, it also makes a stock more expensive to short.

The note continued: "We believe fourth-quarter operating trends are slightly less bad. For Gannett and newspaper publishers in general, the absence of bad news is good news."

GCI doubled its dividend in July and also announced plans to buy back up to $100 million in shares. In the last earnings conference call, CEO Gracia Martore didn't rule out the possibility of increasing the payout or the buyback; that's in keeping with her usual cautious remarks on future plans.

Cost control promised
Martore focused her remarks more on spending cash for new digital investments such as the DealChicken daily coupon site that the company rolled out nationally last summer.

She also assured media stock analysts during that October conference call that GCI would continue focusing on cost-cutting. And, indeed, only last week the company announced another round of first-quarter furloughs for most U.S. newspaper employees.

Gannett Blog readers, meanwhile, have been speculating about another possible layoff in the near future.

[Image: Google Finance]


  1. Whoo hoo. Me likey.

  2. Yes, dividend rumors. Then again, maybe GCI is up because the very schizophrenic Mr. Market recognizes (today)that there's value there, as I have repeatedly said at this site for more than a year. Whenever I do, someone will come along to shout me down because he or she mistakenly believes I'm a company lover or even a company troll.

    Today, let me use a cut-and-paste from the Yahoo! stock board for GCI to make (part of) my case:

    "...if GCI's stake in got the same valuation based on revenues as LNKD it would be worth $2.6B, same as their entire market cap!"

    LNKD is LinkedIn, which recently IPOd. I haven't done the math to prove that's correct, but believe that it is.

    Jim, maybe you'd like to do a story on the potential value of careerbuilder dot com to GCI in a split-off, IPO situation. I'd be interested in what geniuses on The Street think of that. Finding large institutional holders to talk to shouldn't be hard, since it's public information.

  3. Short it. Do it now. $10/share by mid January. And down from there....

  4. Gannett should also spinoff its TV stations. That could represent several dollars a share. Gracia, think of the shareholders for a change.

  5. Makes no sense for Gannett to hike it dividend by even a fraction. It hasn't demonstrated any growth potential towall street to justify a higher valuation. Another share buyback seems about the best this management team is capable of engineering to goose the stock price.

    A $16 price target is wishful thinking when revenue has sunk in quarter after quarter. Ther is plenty of shame in that.

  6. Gracia and her team do have an incentive to see the stock price rise because they hold lots of stock options. More buybacks reduce the overall float, making eps look better to Wall Street.

    $16 may be a stretch near term unless someone like Carl Icahn sees potential and agitates for change, But stranger things have happened. The stock is now up more than 35 Percent from this year's lows.

  7. Okay 10:18, good to go I am in for 3000 shares short. Should be worth a cool $9K to Zorro's (thats me) bottom line in a month or so.

    Come on Gannett, do that voodoo that you do, oh so well! This is going to be the worst 4th quarter ever, thank you for the incompetence and greed, Paul Saleh, Miryam Binkybam, Susie-Woozie, and the rest of the newbies! Fantastic!




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