TorstarCorp (B) (TS.B.TO)

The spike today was based on PostMedia (PNC.B-T) buying SunMedia’s newspapers. He would not be constructive on the sector overall. Longer-term, newspapers are not going to be as prevalent as they once were. There is more of the shift towards digital and mobile.

Biggest question facing them is “Is the dividend secure?”. Had been a 2 trick pony, and is now down to a 1 trick media pony that you divide into 2. Harlequin is gone now, so they have a lot of cash on the balance sheet. The question is, what are they going to do with that cash. Traditional media is hurting, particularly the newspaper business, which is half their cash flow. They now have to do something to break out. In the meantime, they are paying a high level of dividend out of that cash. If they do something that requires cash, they may cut that dividend. 6.6% dividend yield.

You have no concerns about the dividend on this. They have probably $3.50 in cash. The newspaper division is covering the dividend yield. The big question is, what are they going to do with their excess cash. He gets the sense that they are waiting for the Post Media papers to actually get opened up. Post Media is struggling. He wouldn’t be surprised to see this company looking at them as a possible acquisition, and consolidating the space.

This was going nowhere for quite a while. Sold Harlequin and got a much, much bigger number than people had thought they would. With all the cash coming into the balance sheet, the dividend is certainly safe and they can pay down some of their debt. Valuation of about $7.50 is safe, but then they have to decide what they are going to do with all the money.

There is not a lot of cash flow and their business is declining. If they get into any growth in their digital businesses it could increase the multiple. He follows it.

Newspaper industry has been a tough industry as they lose more and more readers and advertisers, more importantly. But TS had this Harlequin star in the company for a long time and at one point was probably worth more than the rest of the company. They could have sold it back then, but now they have to do so to keep the company going. It is not an industry that interests him. Take some profits now.

Dividend is safe. His concern is the move from print to digital media. He now thinks the dividend is safe.

On their last earnings call, they had a decent earnings surprise with over 10% on earnings. Payout ratio is only around 50%-60%. Modestly leveraged and their pensions are completely paid for. Likes that there is a 3.5 million share Short position on it and he doesn’t know if there are any other sellers left as he was calling for blocks and couldn’t find anybody. Also, have Harlequin-based book publishing, which is primarily US$ based. Looking for another earnings surprise. Yield of 8.33%.

Pure value. First improvement in margins in a couple of years. Cut pension deficit in half. There is value to the brand. This is a cheap stock. Can`t see it being lower in a year unless the economy does terribly.

There are some secular factors that definitely give you pause, the decline of newspapers. Cut their dividends a couple of years ago but since then have raised it a couple of times. Yielding about 8.5%-9%, which tells you that there is some question about the long-term sustainability of that. This is one he would avoid.

This is been a sad story to watch. It continually gets pummelled. Valuation, at some point just becomes so incredibly compelling that it is sure to bounce. They don’t have fantastic assets, so he would stay away from this. Would prefer Transcontinental (TCL.A-T) that does a little more printing.

This is a dying business. Pretty hard to get enthusiastic about the print business. Newspapers have to compete with television. News services are getting better and better on competing on the Internet and you can get instant news. Even the Harlequin book side has not been doing well.

(A Top Pick August 16/12. Down 31.32%.) Felt that this one was a mistake. There are a lot of people that are concerned that they may cut the dividend. Not sure what he should do with this one.

The world has sort of turned against the world of print. Newspapers are having trouble globally. A tough area to make money and it’s going to get tougher.

Sees this stock going down. This is a tough, tough business. Newspapers are not thriving at all. There is a permanent destruction in the economic of newspapers. Some newspapers are very solid and the subscriber base is growing but, advertisers don’t want to advertise in the newspaper as much as they used to.