TEGNA INC. $24 - New York symbol TGNA

On June 29, 2015, the old Gannet spun off its newspaper operation as a separate company that would keep the Gannett name (see box). Gannett’s broadcasting and Internet unit was then renamed Tegna. Under the deal, for every two shares investors held, they received one share of the spinoff company and two shares in Tegna. Both firms are now improving their prospects through acquisitions and new alliances. These deals will also help them maintain their current dividends. TEGNA INC. $24 (New York symbol TGNA; Conservative Growth Portfolio, Consumer sector: Shares outstanding: 221.7 million; Market cap: $5.3 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.3%; TSINetwork Rating: Average; www.tegna.com) owns 46 TV stations, which supply 50% of its revenue and 70% of its earnings. The remaining 50% of revenue and 30% of earnings come from its digital division, That unit operates several websites, including Cars.com (car sales and vehicle information), CareerBuilder (job search), Cofactor (advertising services) and G/O Digital (website design). In the third quarter of 2015, Tegna’s revenue rose 18.5%, to $807.1 million from $681.0 million a year earlier. Revenue fell 2.4% at the media unit, as 2014 benefited from election advertising. However, revenue from the digital business jumped 71.6%, thanks to the October 2014 purchase of the 73% of Cars.com it didn’t already own. Earnings rose 24.1%, to $84.6 million from $68.2 million. Tegna spent $125.5 million on share buybacks in the quarter, so its per-share profits rose 27.6%, to $0.37 from $0.29. Tegna recently sold its headquarters in Virginia for $270 million. The cash will help it pay for three recently purchased TV stations (in Portland, Louisville and Tucson). The company also recently signed a new long-term signal distribution deal with the Dish satellite TV system, as well as new affiliation agreements with the CBS and NBC television networks. Tegna’s long-term debt of $4.5 billion is a high 85% of its market cap. That’s mainly because the company didn’t want to burden the newspaper spinoff with debt as it builds up its news websites. However, additional ad revenue related to the 2016 Summer Olympics and U.S. presidential campaign should give Tegna more cash to pay down its debt. The company will probably earn $2.23 a share in 2016, and the stock trades at just 10.8 times that forecast. The $0.56 dividend yields 2.3%. Tegna is a buy.