The 2 Best Dividend Stocks in Newspapers

Business hasn't been easy for the newspaper industry in recent years.

The advent of the internet upended a centuries-old business model, built on a combination of advertising and news, that made newspapers into cash cows. Since many local communities had only one or two papers, the publications functioned as a monopoly or duopoly.

Today, however, with the plethora of free news on the internet and multitude of advertising channels like Google andFacebookthat pinpoint user interests, the newspaper's core advantages have been eroded.

Image source: Getty Images.

Still, newspapers have endured, and the election of President Donald Trump brought a resurgence of interest and subscriptions unseen in the modern era. For dividend investors, there are also some opportunities available in the industry as many of these companies are committed to returning cash to shareholders. Let's take at two of them below.

1. Gannett

Like much of the newspaper industry,Gannett(NYSE: GCI) shares have fallen in recent years, but the company has maintained its dividend payment, offering a juicy yield of 8.3%. Dividend yields that high are rarely 100% safe, and while Gannett's payout is at risk, theUSA Today parent is taking steps to turn around its business, and seems to be benefiting from the growing interest in newspapers.

In the first quarter, revenue increased 17.2% as the company saw a 3.7% uptick in comparable digital advertising revenue. Digital-only subscriptions jumped 72.6%, which included acquisitions, and the company raised its full-year EBITDA guidance by $30 million to $355 million-$365 million after posting stronger-than-expected growth in the quarter.

In the past year, the company has acquired Journal Media Group, North Jersey Media Group, and ReachLocal, a digital marketing company that should help the publisher leverage digital advertising. Cash flow was solid in the quarter at $16 million, slightly less than the $18.2 million in dividends.

Gannett is a high risk/reward play as the 8.3% yield is a good incentive for investors to be patient with a turnaround. With the industry tailwinds and recent acquisitions, Gannett should be able to get profits moving in the right direction.

2. The New York Times

The New York Times Co.(NYSE: NYT) finds itself on this list not because of its dividend yield, which is modest at 0.9%, but because of the stock's strong performance lately as its digital strategy has taken hold.

The stock has jumped more than 50% since the election as the so-called Gray Lady was one of the prime beneficiaries from the post-election news boom. The company added 308,000 net new digital subscribers in the quarter, the best quarter for subscriber growth in its history.

Digital advertising revenue increased 19%, an important sign as publications liketheTimes rely on digital ad growth to replace declining print ad revenue. Overall revenue was up 5% in the quarter.

While subscriber growth is expected to moderate in the current quarter and through the rest of the year, theTimes'brand strength is virtually unrivaled in newspapers as it is considered "the paper of record." That reputation should help it draw new subscribers from around the country and the world. As the effects of the print ad decline mitigate, the bottom line should see steady growth.

The challenge for these new companies, and others, will be to beef up digital advertising and circulation as they manage the decline of print advertising. As they become less dependent on print ads, the prospects for success are greatly improving.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool recommends The New York Times. The Motley Fool has a disclosure policy.