Of all the UK shares on the FTSE All-Share index, Reach (LSE:RCH) is in the top 25 of dividend payers. And with a yield close to 10%, the newspaper group’s probably on the radar of income investors.
Buyer beware
However, as a general rule, stocks offering a return in excess of twice the 10-year gilt rate (4.65% at 30 May) should be treated with caution. It stands to reason that shareholders will demand a higher return on an investment that’s perceived to carry more risk.
And with a portfolio comprising many famous newspaper brands, including The Mirror, Express, and Manchester Evening News, I believe the challenge for Reach is to replace its print revenue with digital revenue. And to do it quickly.
In 2024, Rupert Murdoch, who knows a thing or two about the media, was asked when he thought the last printed newspaper would be published. He replied: “15 years with a lot of luck.”
If he’s right, Reach has until 2039 to fully transition to an online world.
So how’s it going? Well, if I’m honest, not great.
A changing world
For the year ended 31 December 2024 (FY24), print revenue fell £32.1m (7.3%) and digital income increased by £2.6m (2%), compared to FY23.
| Measure | 53 weeks to 31.12.23 | 52 weeks to 31.12.24 |
|---|---|---|
| Print revenue (£m) | 438.8 | 406.7 |
| Digital revenue (£m) | 127.4 | 130.0 |
| Other revenue (£m) | 2.4 | 1.9 |
| Total revenue (£m) | 568.6 | 538.6 |
It was a similar story during the first three months of 2025. Here, compared to the same quarter in 2024, print fell 5.1% (including an alarming drop of 12.5% in advertising revenue) and digital rose by 1.6%.
And although online sales are going in the right direction, the problem is that the increase isn’t enough to compensate for the long-term decline in revenue from traditional newspapers.
In 1967, the Mirror had a daily circulation of 5.25m. Today, less than a quarter of a million copies are printed each day.
And putting news behind a paywall isn’t that popular, particularly with young people.
According to Ofcom, the three most popular news websites of adults (BBC, Sky News and The Guardian) are free. And while 88% of 16-24 year-olds use the internet as their primary source of news, they don’t go near digital newspapers. Instead, the top five sources – again, all free — are Instagram, YouTube, Facebook, TikTok and X.
An uncertain outlook
Despite this, Reach has maintained its dividend at 7.34p for its past three financial years. The group’s clearly doing everything it can to keep offering a generous payout while I think it should be cutting it. And it should use the funds saved to invest more in the digital transition.
For FY24, it reported adjusted earnings per share of 25.3p. But analysts are forecasting a drop over the next three years – 23.39p (FY25), 21.92p (FY26) and 21.97p (FY27). If they’re right, the dividend will come under pressure. Although the consensus is for a reasonably modest cut to 7.17p by 2027.
However, given the challenging (and changing) media landscape, I don’t want to buy Reach shares.
Don’t get me wrong, I’m not saying the group’s bad at what it does. In fact, the opposite’s true. For example, in 2024, it achieved the milestone of 100m social media followers and reached 69% of online users in the UK.
It could use that to drive revenue higher. I just don’t see how it’s going to make the same profit from the digital world as it’s historically achieved from print media.
