Most UK investors have probably never heard of Reach (LSE: RCH) — a £226m media company on the FTSE All-Share with a 10% dividend yield.
Yet many Britons have likely made use of its products. Reach is one of the UK’s largest newspaper groups, publishing 240 regional papers including the Daily Mirror, Sunday Mirror, Daily Express, Sunday Express, Daily Star and the magazine OK! It has also branched out overseas, becoming the UAE’s most influential marketing and talent agency.
Founded back in 1903, it’s been around for 122 years and despite a turbulent history, remains an integral player in the British media landscape.
The most recent numbers show mixed fortunes. In 2024, revenue slipped slightly to £538.6m. But, impressively, operating income jumped 26% to £80m, while earnings more than doubled to £53.6m.
Crucially for dividend investors, the yield’s not only chunky but also appears sustainable. The company’s paid dividends for 11 consecutive years and currently has a payout ratio of 46.4% — giving it enough room to reinvest in growth while still rewarding shareholders.
And the valuation? Well, that’s where things get interesting. The shares trade on a price-to-earnings (P/E) ratio of just 4.5, a price-to-book (P/B) ratio of 0.33 and a price-to-sales (P/S) ratio of only 0.43. Combined, these three ratios point to a stock that’s being drastically undervalued by the market.
But there’s a reason for the market’s scepticism.
Modern publishing risks
Reach’s share price has been sliding for over a year, down around 30% since August 2024. That’s a concerning drop considering that the FTSE 100‘s up 10% – suggesting no fault in the overall UK economy.
However, the real problems started much earlier.
During the 2008 financial crisis, it lost 95% of its value and has never fully recovered. There was a brief resurgence during the pandemic as news consumption spiked, but once that subsided, the momentum quickly faded.
The share price has effectively traded sideways for three years, reflecting the structural challenges in the industry. Print continues to decline, while digital advertising revenues are notoriously fickle. And now artificial intelligence (AI) poses a new headache. With search engines summarising news in seconds, many readers never make it to the publisher’s website — and that means lost ad revenue.
My verdict
Despite these headwinds, Reach isn’t sitting still. Rather than fading away, it seems intent on reinventing itself. The company recently struck an exclusive deal with Egyptian macro-influencer Marwa bin Hassan, signalling a willingness to tap into global digital media trends.
It has also outlined clear growth priorities: expanding video and audio content, embracing AI to improve efficiency, and pushing harder on digital subscriptions to reduce reliance on advertising.
Recent first-half results were encouraging, with revenue beating expectations and management expressing confidence in hitting full-year targets for 2025.
For me, this makes Reach a fascinating proposition that’s worth considering. Yes, the risks are real — but with such a low valuation and a 10% dividend yield, it could be an undervalued and potentially rewarding stock for a diversified income portfolio.
