Moody's on NYT Co.: Cut Dividends or Risk Junk Status

By: E&P Staff Moody's Investor Services is suggesting The New York Times Co. cut its dividend to save its rating from junk status.

The New York Times, reports Bloomberg News, had one of the highest dividend payouts yielding 6.5% second only to Gannett. Many newspaper executives including A.H. Belo's Robert Decherd, McClatchy's Gary Pruitt, and GateHouse Media's Michael Reed indicated on quarterly conference calls they are reconsidering their dividend strategies.

Moody's John Puchalla told Bloomberg's Sarah Rabil that a cut in the dividend at the New York Times would free up cash. "They'd have potentially more cash available to fund investments and debt reduction. Depending on how they use that cash that's freed up, that could be beneficial to the rating.''

Goldman Sachs estimates the New York Times Co. could eat as much as 75% of its free cash flow in dividend payouts next year, Rabil reported.