In the recent years, the publishing sector has started to show modest growth. The global publishing market which was around $244.4B in 2011 is expected to reach $273B levels in 2016, an increase of 11.7% in 5 years (source: datamonitor.com). The industry comprises of traditional print media like books, magazines etc. and the printing business, which is basically physical production of media. The sector has good operating profit margins but the net profit margin is dented due to interest burden of relatively high leverage. The internet boom has forced companies to diversify into electronic printing and other media to adapt and survive. Expected moderate growth in the US economy over the next few years is likely to have a positive rub-off effect on this macro-sensitive industry. Consequently, there are several companies from this sector listed in the US stock markets which are expected to post good growth and also provide steady income to investors in the form of dividends. Some of the fundamentally more balanced stocks are discussed below.
Thomson Reuters (NYSE: TRI) is a provider of information to the world’s businesses and professionals. The company caters to the financial & risk, legal, tax & accounting and intellectual property & science segments of the information market. The revenue of the company has remained steady since 2009 ($12.948B) but the net income has grown significantly from $821M in 2009. The dividend has grown from $1.12 in 2009 to $1.28 in 2012 (yield 4.25%) indicating modest growth. The P/E is 12.3 and the price to book ratio (P/B) is a modest 1.47. The debt to equity ratio (D/E) is around 42 and the net profit margin is a healthy 15.97%. TRI has been paying quarterly dividends continuously since 1989 and the payout ratio is 51%. PEG (5 years estimate) of more than 6% and a trailing average dividend yield of 3.9% makes it a very good overall package of capital appreciation and dividend growth.
Pearson (ADR) (NYSE: PSO) is an international media and education company with operations in education, business information and consumer publishing markets. The group comprises of Pearson Education, The FT Group (finance and business information) and The Penguin Group (books and novels). The revenue and net income have grown dramatically from $5.14B and $376M in 2009. The P/E is just above 10 and the P/B is a healthy 1.61. Dividend has grown from $0.35 in 2009 to $0.65 in 2012 (3.75% yield). The PEG estimate is 2.5% and the trailing 5 year dividend yield is 2.7%. Pearson has been paying dividends since 2003 and the amount has grown every year since then. A low D/E ratio and high net profit margin coupled with a payout ratio of 35% makes Pearson a good long term bet.
Reed Elsevier (NYSE: ENL) is a provider of professional information solutions. The company is into providing solutions in the scientific, technical, medical, risk, analytics, legal, tax, regulatory and business information segments. Majority of the revenue of this geographically diversified company comes from the North American market. P/E ratio is around 15 but the price to book is very high at 6.46. Reed Elsevier has been paying dividends continuously since 2006 but the revenues have held steady between 2009-2011. The expected PEG is a modest 2.44%. The dividend yield of 3.78% will be difficult to maintain due to the recent increase in price from ~$22 to ~$30 levels. The trailing 5 year average yield is 3.1% and the payout ratio is 65%.
Considering the expected future growth of the sector and the dividend payouts, Thomson Reuters looks promising, based on its earnings growth potential and its time tested performance of paying steady dividends.
Stock symbol(s): ENL,PSO,PSON.L,REL.L,REN.AS,TRI,TRI.TO