Entercom cuts dividend 78 percent as Wall St. beat up its stock

With Wall Street treating Entercom Communications as if it’s “on the verge of bankruptcy,” the Philadelphia-area radio giant took the weed whacker to its dividend on Friday, cutting it 78 percent.

The new annual dividend is 8 cents a share, compared with 36 cents previously.

The money saved by paying a lower dividend to shareholders will be used to pay down debt and repurchase shares. Entercom, the nation’s second largest radio company (behind iHeartRadio), says it is confident in its prospects.

Some analysts appear to be concerned about a recession that could squeeze radio advertising.

“We believe that redeploying capital from dividends to both share buybacks and debt reduction will allow us to drive increased shareholder value, given our belief that our stock is trading significantly below its intrinsic value," Entercom CEO David Field said in a statement.

Entercom -- which merged with CBS Radio in late 2017 -- owns 235 radio stations nationwide, with Philly stations such as KYW, WPHT and WIP reaching 2.7 million listeners a week. It has reformatted many of its stations, expanded into podcasts, and developed a national audio sports network.

On Wednesday, the Bala Cynwyd company reported 2.3 percent higher revenues in the second quarter, though analysts had expected 4 percent. Field said earlier in the year that the company could hit 4 percent. Field noted on Wednesday that an unexpected slowdown late in the second quarter was “sobering.”

Second-quarter net income available to shareholders rose to $30 million compared with $2.4 million in the year-ago period -- which shows it’s profitable.

“Taking a hard look at this one, we’d say the business is fine,” Marci Ryvicker, an equities analyst covering Entercom with Wolfe Research, said last week. “Our call here is that this company is priced as if it is on the verge of bankruptcy, and it just isn’t.”

Ryvicker added that she was "frustrated” along with everyone with the stock price else but “we think that management’s passion for the business and long-term strategy translates into overly bullish commentary when speaking to Wall Street. And as we know, stock movement is all about expectation.”

Entercom shares rose 2.6 percent during regular trading on Friday but then plunged 15 percent in after-market trading to about $3 a share when the company announced the dividend action, according to Yahoo.

At Monday’s closing price of $3.32 a share, Entercom had a market capitalization of about $460 million. It also has long-term debts totaling at least $1.6 billion.