GateHouse Media’s First Post-IPO Dividend Meets Expectations

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By: E&P Staff

GateHouse Media Inc.’s first declared dividend since going public is in line with expectations for a company that is banking on relatively high dividends to keep investor interest, Goldman Sachs analyst Peter Appert said Friday.

In a note to investors, Appert said the partial period dividend of 24-cents for the part of the fourth quarter since the company went public on Oct. 25, combined with a previous 8-cent dividend declared for part of the quarter prior to the initial public offering (IPO), was in line with the investment house’s expectations.

“With the dividend a crucial piece of the GateHouse investment story, we are pleased to see no surprises in this dividend declaration,” Appert wrote.

Goldman Sachs said it estimates with more newspaper acquisition and “modest organic growth,” GateHouse can grow the dividend 16% to 27% over the next 12 to 24 months. GateHouse’s implied annual dividend rate is $1.28, Goldman Sachs said.

“Our investment view remains positive: GateHouse Media has built the right model for the newspaper industry,” Appert wrote. “A unique financial model, using significant financial leverage and acquisitions to maximize free cash flow and dividend growth, makes the company the most appealing investment story among the otherwise lackluster pure-play newspaper publishers.”

The note cautioned, though, that GateHouse’s high debt level in a cyclical industry “creates the potential for significant volatility in cash flow and dividends.”

Fairport, N.Y.-based GateHouse said the partial period dividend is payable on January 15, 2007 to shareholders of record on December 29, 2006. The pervious dividend of 8-cents was October 30 to holders of record as of October 23, 2006.

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