Sinclair Broadcast Group reinstates its dividend


Two years after suspending its dividend payments in the midst of the recession, Sinclair Broadcasting Group is again going to send cash to its shareholders. The first quarterly payment will be made next month.

“2010 ended on an even stronger note than originally anticipated with record levels of political advertising helping to drive net broadcast revenues up 23.5% in the quarter,” said David Smith, President and CEO of Sinclair. “For the year, excluding political, revenues from our core television business finished up 12.0% led by the automotive recovery. We expect to see continued improvement in our core advertising, driving our top-line in 2011. Based on the strength of the business and the cash flow generated, we made a special $0.43 per share cash dividend distribution to our shareholders in the fourth quarter of 2010, and for 2011 are permitted under our Bank Credit Agreement to return up to $40 million in dividends and/or share repurchases to our shareholders. I am pleased to report that due to our optimistic 2011 outlook and confidence in the economy longer-term, our Board of Directors has reinstated our dividend policy and declared a regular quarterly dividend in the amount of $0.12 per share, beginning with the payment date of March 15, 2011.”

Sinclair reported Wednesday morning that Q4 revenues from continuing operations were up 23.5% to $189.9 million. Operating income was $81.3 million, compared to a loss of $66.1 million a year earlier, which had been due to the write-off of $119.5 million in impairment charges for goodwill and other intangible assets.

In management’s conference call with analysts, Sinclair reported that Q4 television broadcast cash flow (BCF) gained 43.4% to $97.9 million. For the full year, BCF grew 35.8% to $294.7 million.

“2011 is off to a good start with the core business expected to grow and after realizing $6.2 million in revenues from the Super Bowl which aired on our 20 Fox affiliates. We continue to see growth in the automotive category in the first quarter, which is expected to increase 18%. On the expense side, our programming payments are expected to decline by almost $21 million for the year. Due to our expectation to generate significant cash flow, we will be reinvesting some of our cash flows into the television operations in order to drive our competitive positions, upgrade our infrastructure, and enhance our technical efficiencies. We will also be distributing a portion of the cash flow to our shareholders in the form of a quarterly dividend,” said CFO David Amy in the company’s news release.

RBR-TVBR observation: Kudos to Wells Fargo Securities analyst Marci Ryvicker, who predicted this dividend move in a note to clients on Tuesday. Sinclair already has its balance sheet in order. For many other broadcasters paying down debt is still job one, but then they will also want to look at paying dividends to appeal to value investors.