Dividend yield places North Media in the top tier of Nasdaq Copenhagen companies

North Media’s earnings are set to decline in 2023, and the company’s prospects are unclear for at least the next twelve months. A nosedive in the share price indicates a lack of investor confidence in North Media’s long-term plans. Nevertheless, the price plunge and high dividend still render North Media an attractive stock.

Eighteen months ago, a share in North Media was priced at almost DKK 130. Today, it trades at less than half that, and the 2022 annual report did not halt the plunge.

At first glance, this is quite understandable. The headline alone, “2022 was the start of a new and more uncertain future”, was enough to make investors quiver. And with North Media then explaining how the company was impacted by difficult market conditions in the second half of the year and that these are expected to persist till at least the end of 2023. In other words, there is no indication as to when the tide is expected to turn. Rather, the company sets a minimum term for the difficulties and leaves the anticipated maximum length open-ended. This leaves investors with a huge conundrum about the earnings prospects in both the short and the medium term.

Going even further, the company then expands the sense of uncertainty to include also North Media’s long-term prospects: ”On account of the current macroeconomic uncertainties, we will not publish updated long-term financial ambitions.”

The initial impact of the difficult market conditions may be gleaned from North Media’s 2023 guidance. It projects a drop in both revenue and earnings. Revenue is expected to drop to the DKK 920–975m range (2022: DKK 995m) with EBIT projected at DKK 125–160m (2022: DKK 192m).

The North Media Group’s largest company by far is FK Distribution. In 2022, it contributed 84 per cent of the consolidated revenue and 96 per cent of EBIT.

North Media expects the company’s revenue to drop by 7 per cent on a 10 per cent drop in volumes. The other three companies of the Group are not able to compensate for the decline, as only one of them is forecasting improvements in 2023. BoligPortal is the company providing the positive guidance, expecting to improve on both revenue and earnings. However, BoligPortal accounts for only about 10 per cent of the consolidated revenue and earnings, so any improvements here will clearly not offset the decline in FK Distribution.

The other two North Media companies, Ofir and Bekey, are both expected to generate losses in 2023, so there is no help here either. And whether in the short or the long term, they do not look set to take over from FK Distribution, which operates in a declining market.

From a business model perspective, North Media is currently an investment in the past, which is clearly reflected in the low valuation investors attribute to the company. On the other hand, a short-term investor should note that despite the setbacks anticipated for 2023, FK Distribution still makes good money.

This enables North Media to deliver a return by way of a dividend payout that very few listed companies are able to match. This year, the company is paying a dividend of DKK 4 per share, which implies a dividend yield of nearly 7 per cent.

North Media has a securities portfolio worth in the triple digits of millions Danish kroner, so although it is facing a difficult future, the company is by no means in danger of folding. We consider North Media to be a solid bond-type investment, offering a high return.

This article was originally published by Danish weekly online newsletter ‘Økonomisk Ugebrev’ and may be downloaded here (in Danish).