The New York Times Company's Board of Directors voted Thursday to suspend the quarterly dividend on the company's Class A and Class B common stock, a significant blow to the Sulzberger family and a sign of the company's financial struggles. The company had previously slashed its dividend from $0.23 per share to $0.06 per share in November 2008.
"Today's decision provides the Company with additional financial flexibility given the current economic environment and the uncertain business outlook," chairman Arthur Sulzberger said in a statement. "We have taken decisive steps to reduce capital spending, lower operating costs and re-evaluate our assets. Last month we announced a private financing transaction for $250 million in senior unsecured notes and warrants. We also recently announced that we are exploring the possible sale of our ownership interest in New England Sports Ventures, LLC. We expect the suspension of the dividend, coupled with our other actions, will help us decrease debt and improve the liquidity of the Company, a difficult but prudent measure in this operating environment."
The company's stock declined five percent Thursday, closing at $3.51 — a price many have pointed out is now below the newsstand price of the Sunday paper.
A New York magazine profile of the Sulzberger-Ochs family from October explained that the dividend has been sustaining the heirs of the Ochs-Sulzberger fortune:
In order to keep the family--and shareholders--happier in these lean financial times, Sulzberger has quietly ramped up the amount of cash they receive in a quarterly cash dividend. This, more than the sale of stock, is the source of the Ochs-Sulzbergers' working wealth. Sulzberger and CEO Janet Robinson raised the dividend by an extraordinary 31 percent last year--even as the stock price declined. Of the $132 million a year the paper gives to shareholders, about $25 million of it now goes directly into the coffers of the Ochs-Sulzberger trusts....
The fifth generation, the sons and daughters of Arthur and his cousins born between 1965 and 1990, have largely remained in the shadows of the company's affairs, anonymously going about their lives as beneficiaries of its generous dividends, their names listed in the occasional SEC filing detailing the family trust. Like their parents, they've led the lives of a prestigious trust-fund family--attending private schools like Dalton and Fieldston and acquiring Ivy League educations at Brown and Columbia, then casting about for noble life pursuits or whatever pleases them....
One thing that would cause the fifth generation to take a sudden interest in the family business is a decrease in trust income. "Once that dividend is cut, then all hell will break loose," says a former Times executive. "Because that's what the family lives on. Then it's over. It's going to unravel. They're going to be forced to look for external professional management to run that company." In a brief phone call, Stephen Golden (cousin of Arthur Jr., brother of Michael, father of Dave) cautioned against assuming that the younger relatives' interests and careers away from the newspaper mean that they aren't engaged with its plight. "If you follow that through, what you end up with is an assumption, you say that everyone who is not engaged in the paper is unconcerned. That's a dangerous assumption."