NEW YORK ( TheStreet) -- My favorite "dinosaur" stock has done it again. USA Today publisher Gannett (GCI), which appeared to be on its' deathbed just a few years ago, put up another better-than expected quarter.
I call Gannett a "dinosaur" stock because the presumption has been that newspaper names are going the way of the dinosaur. Between intense competition from the Internet as a news source, and declining advertising revenue, newspapers appear to be a modern day version of the buggy whip, a device that was no longer needed once the automobile went mainstream.
Of course, Gannett is actually much more than a newspaper company; in the third quarter, nearly 37% of revenue was from non-publishing related activities. The broadcasting segment, which generated just 18% of total revenue, was responsible for nearly 55% of operating income. The digital segment generated 14% of revenue, and more than 18% of operating income.
While publishing advertising revenue fell 6.6%, publishing circulation saw a 5.6% uptick. That's the first time circulation revenue has grown in five years. It's been just over a month since the company debuted its' new design for the flagship
, and it is too early to tell if there will be any impact.
Third quarter revenue rose 3.4% to $1.309 billion. While that quarter over quarter increase may not seem all that remarkable, it's been years since Gannett had a quarter/quarter revenue rise. Furthermore, revenue exceeded the $1.29 million consensus estimate. On the earnings front, the company bottom lined $133.1 million, or 56 cents per share, also better than the 53 cents per share consensus.
The company continues to generate significant free cash flow, including $163 million for the quarter. That's what has allowed Gannett to increase the dividend, which now provides a 4.5% yield.
While it appears that the company has the ability to raise the dividend further, the impending increase in taxes on qualified dividends (from 15% to ordinary income rates, as high as 43.4% including the new Medicare 3.8% surtax leveled by "Obamacare") may preclude the company from doing so. It's too early to tell on that front.