Should I Do It? Belo a Cut Above

Despite the 8.6% year-over-year growth in this division, Belo's overall July revenue was up just 1.1% from the previous year. That's because newspaper sales (54% of total sales in 2005) fell 4.2% over the same period, in what management expects to be the softest month of the third quarter.

Readers should understand that if Belo's stock does rebound from the midteens, it likely won't be predicated by a turnaround in newspaper ad sales. Rather, management's focus has been to shift assets over to television and the Internet, where the secular advertising shift during the past couple of years has been too steady to ignore.

In the meantime, the company is also cutting costs in the newspaper business. On Aug. 10, management said it will eliminate about 17% of the editorial staff at the Dallas Morning News, which has a daily circulation of 460,000.

It's also worth noting that the company offers a 3.2% dividend yield. Belo raised its quarterly payment last month, and will distribute the next 12.5-cent dividend Friday. The company's payout is at the high end of the industry range, and can be comfortably covered 2.3 times with expected 2006 earnings.

So yes, Belo is attractive at current levels for investors who are patient. Supported by the above-average dividend yield, and the prospect that a half-dozen larger competitors may begin to consolidate the newspaper industry over time, Belo's shares can trade up toward the high teens over the next year.

Interested in more value stock picks? Check out David Peltier's TheStreet.com Value Investor.

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