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 USA Today, 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.
However, Gannett does have another more tax friendly arrow in its quiver to return money to shareholders via stock buybacks. During the third quarter, the company repurchased 2 million shares, at an average cost of about $17.50 per share. Year to date, Gannet has repurchased 8 million shares. Debt, which was a huge issue for the company less than four years ago, no longer is. At quarter end, total debt stood at $1.63 billion, down from more than $3.8 billion at the end of 2008. Part of the company's rebirth certainly has to do with paying down these obligations, and making the company leaner in the process. Still, there's not a whole lot of love for Gannett on the Street. Analysts have routinely disliked, or have been neutral on this stock since it nearly imploded in early 2008, and most are still skeptical. They were skeptical at $2, at $10, and here again at $18 and change. But that's what makes value investing so interesting; find a stock that's hated and misunderstood, and identify valid and compelling reasons that everyone else is wrong (not just to be different; often stocks are disliked for good reason.) You won't always be right, and you need to do your homework, but the rewards can be great. At the time of publication the author was long GCI. Follow @JonMHellerCFA This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.