Paramount Slashes Dividend To Conserve Cash, Preps Simon & Schuster Sale, Cites “Disciplined Approach” To Headcount As Stock Plunges 25%

In a dividend shocker this morning, Paramout Global said it’s slashing quarterly payouts to 5 cents, so 20 cents, annually — a major drop from about 24 cents a quarter or nearly a buck a year. It said the move would save it $500 million annually and that it’s important to conserve cash and pay down debt given strong macroeconmic headwinds.

Investors were taken aback. The shares had dipped on the weak quarterly numbers earlier today and took anoter dive – they’re currently down 23%. Why the cut now? analysts asked on a conference call after the earnings. Yes, broadcast and cable advertising fell 11% last quarter, contributing to flat revenue and red ink. However, CEO Bob Bakish and CFO Naveen Chopra had just finished saying that the ad market shows signs of stabilizing. They also reiterated that 2023 will be the year of peak losses at streaming, and that financials would turn around in 2024. They insisted the company is well prepared to weather a WGA strike.

Bakish cited the importance of financial flexibility given uncertainties in the macro climate, where interest rates just went up again yesterday and some are still predicting a recession in the second half.

“It’s prudent for all companies to maximize their balance sheet for flexibility,” said Chopra. “I would emphasize that the reduction of the dividend does not mean that we intend to spend more than previously planned on streaming.” It’s about conserving cash “and deleveraging our balance sheet, which is smart thing to do in an uncertain environment. And to create long term shareholder value.”

Disney famously and abruptly, eliminated its dividend during Covid. CEO Bob Iger said in February the company has asked its board to reinstate it by the end of the year. The payouts are beloved by investors, especially Disney’s legion of retail shareholders. (At the same time, Iger also announced plans to lay off 7,000 employees.)

Another prong in Paramount’s quest for cash is the renewed sale push for Simon & Schuster after a previous deal fell apart last year. Bakish said the company sees “a path to closing a transaction this year.”

In an industry wracked by layoffs, Chopra also talked about headcount. Nothing specific but said Par is taking “a discliplined approach.”

More to come…