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Stock Strategist

News Corporation Gives the Crowd What It Wants

Stock buybacks and dividends are in store.

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With no debt and more than $2 billion of cash on the balance sheet, it is not surprising that  News Corporation (NWS)/(NWSA) has stepped up capital-management initiatives. The decision to start paying a semiannual dividend of approximately $0.10 per share from the first quarter of fiscal 2016 comes hard on the heels of the recent stock-buyback activation. In fact, $29 million worth of shares have been bought back since early May. These moves show that the company is bowing to investor pressures and liberating excess capital for the benefit of shareholders. The actions in no way compromise the need to continue reinvesting amid persistently fierce competition and structural headwinds facing the firm's print media operations. This is especially so given the continuing free cash generation of $400 million-$500 million annually, an aspect of News Corporation often lost on investors.

We have incorporated the semiannual dividend of $0.10 per share beginning from fiscal 2016 (that is, from the September quarter of 2015). The impact on our earnings estimates is not material and certainly not enough to change our $18 fair value estimate.

Brian Han does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.