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Report blasts Washington Post Co.’s strategy

A scathing report by deputy editor Ryan Chittum in the Columbia Journalism Review criticized the Washington Post Co.'s dividends and share buybacks.

Chittum noted that the Post's Kaplan education unit's sales dropped 14% from 2010 to 2011 and fell another 11% in the first quarter of 2012, as for-profit schools have been cited for predatory practices. At the same time, the Post's newspaper division suffered a 7% decline in revenue and reported an operating loss of $23 million in the first quarter.

"Despite this, the company continues to fork over hundreds of millions of dollars to shareholders in the form of dividends and share repurchases," Chittum wrote. He noted that the company as a whole is still profitable -- it has earned $546 million since early 2008 -- but it has spent $1.1 billion on buybacks and dividends.

Chittum wrote:

Much of that money is being squandered to appease the short-term interests and cash needs of shareholders, who very much include the Graham family, which controls the voting shares of the Post.

The author noted that the Post Co. has raised its dividend in nine of the last ten years, for a total increase of 69%. In addition, he wrote, the Post has spent $912 million over the past six years to buy back its shares from investors. "In the last two years alone," Chittum wrote, "the company has spent $653 million on share repurchases, buying in at an average $383 a share, 12 percent above their current price...."

Chittum also noted that the Post's newspaper division has cut its newsroom staff nearly in half through buyouts and layoffs. "The Post won't take risks betting its cash on its namesake news organization's future," he wrote. "It will unload nearly a billion dollars into its own pitiful stock." He pointed out that the losses on the company's share buybacks in 2010 and 2011 could have provided more than three times the funding to save the newsroom from cuts.

Chittum pointed out that the company has raised home delivery prices for the Washington Post 76% while failing to introduce a paywall for its digital edition. Meanwhile, digital ad revenue has fallen by 8% in the first quarter.

Chittum noted that Washington Post Co. executives declined to comment on his analysis. (Source: Columbia Journalism Review, May 11, 2012.)

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