For the past two days, Gannett Co.'s stock has closed below $5 for the first time in its history, dropping to $4.75 Wednesday. Gannett Blog calls the dip "a critical level that could spur mutual funds and other big investors to dump it from their portfolios, risking further decline." Institutional investors own most of the shares and are prohibited by their charters from holding stock worth less than $5, the blog went on to say. Gannett, which owns The Daily Advertiser, is the nation's largest newspaper chain. Gannett Blog, which is not affiliated with Gannett Co., reported:
The new low pushes the dividend yield up to 32%, pressuring the board of directors more to cut the payout - a possibility Chief Financial Officer Gracia Martore (left) warned about Friday, during the fourth-quarter earnings conference call.
"Every company globally is very focused on conserving debt, conserving cash,'' Martore told Wall Street analysts, according to Seeking Alpha's transcript. "I think that you will find that we had to look at the dividend back in October and I think that the board wisely wanted to see what the impact of a burgeoning credit crisis and more difficult economic conditions would bring."
Trade publication Editor & Publisher reported Monday that Gannett's debt barely remains investment-grade after Moody's Investors Service downgraded its credit rating. E&P reported:
Moody's downgraded Gannett senior unsecured debt to Baa3, its lowest-investment grade rating, from Baa2. It also ratcheted down the rating on Gannett commercial paper - unsecured obligations issued for short-term cash needs - to Prime-3 from Prime-2.
Moody's also put the ratings on review for another downgrade - which would put the company into junk, depressingly familiar credit territory for many of its newspaper peers, including The New York Times Co.
A junk rating would cut Gannett's access to investment from important sources of funds that will not buy debt that is not investment-grade rated.