City Desk

Post Downgraded, But Investors Get Payday

If you saw the healthy $2.45 per share dividend the Washington Post Co. issued to investors earlier this month, you'd be forgiven for thinking the company's financial problems weren't so dire. How could they be, if the Post Co. was frittering away cash on a dividend?

Apparently, Standard & Poor's wasn't fooled. The ratings agency downgraded its rating for the company yesterday from BBB+ to BBB, putting it just two rating grades above junk-bond status. The main culprit here is flagging returns at the Kaplan for-profit education branch and the newspaper, but the dividend also makes an appearance in the S&P analysis (emphasis added):

We believe discretionary cash flow will remain depressed at under $100 million in 2012, as a result of the effect of weak education segment operating performance and ongoing cable capital spending requirements. In addition, the dividend, which accounts for about one-third of operating cash flow, increased in February 2012, after more than 15 years of consecutive increases.

The Columbia Journalism Review ran the definitive Post financial screwiness story in May, but these two news items are all you really need to know to see what's going on at the Post Co.: Even as its flagship paper lost $15.9 million in one quarter and Kaplan's revenues fell 9 percent, the company is increasing its dividends.

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