TORSTAR CORP. $6.17 - Toronto symbol TS.B

TORSTAR CORP. $6.17 (Toronto symbol TS.B; Shares outstanding: 79.8 million; Market cap: $492.4 million; TSINetwork Rating: Above Average; D i v i d e n d y i e l d : 7 . 7 % ; www.torstar.com) gets 70% of its revenue from its newspapers, including The Toronto Star, Canada’s largest daily newspaper by circulation. The remaining 30% comes from Harlequin, a leading romance novel publisher.

In the first quarter of 2013, Torstar’s earnings fell 76.2%, to $4.2 million, or $0.05 a share. A year earlier, it earned $17.5 million, or $0.22 a share. If you exclude unusual items, earnings per share would have declined 36.4%, to $0.14.

Revenue fell 4.8%, to $313.4 million from $329.3 million. Lower advertising revenue offset higher distribution revenue at Torstar’s weekly community papers as it expanded into new markets. Harlequin’s revenue fell 2.9%, excluding the negative impact of foreign exchange rates. That’s because rising e-book sales failed to offset slowing demand for printed books.

Torstar continues to lay off workers and outsource certain editorial functions. That should cut the newspaper division’s costs by $14.8 million in 2013. Similar moves by Harlequin should save it $2.2 million this year.

These savings should help Torstar keep paying quarterly dividends of $0.13125 a share, for an 8.5% annualized yield.

Torstar is a buy.

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