AH Belo to cut 500 jobs, reevaluate dividend

(Adds buyout, dividend details)

By Robert MacMillan

NEW YORK, July 28 (Reuters) - AH Belo Corp (AHC.N), owner of the Dallas Morning News, will cut 500 jobs and reevaluate its dividend payments, the company said on Monday, after reporting a 21 percent drop in second-quarter advertising revenue.

Belo, which also publishes the Providence Journal in Rhode Island and the Press-Enterprise in Riverside, California, will offer buyouts in order to cut the work force by about 500 positions, Chief Executive Robert Decherd wrote in letters to shareholders and to employees.

It now employs about 3,500 people, spokeswoman Maribel Correa said.

Layoffs are a possibility, the company said.

Most of the cuts would come at the Dallas paper, which is larger than the others, Correa said.

Many other U.S. newspaper publishers have decided to institute layoffs and buyouts this year to deal with a painful decline in ad revenue, including McClatchy Co (MNI.N), which is cutting 10 percent of its staff, or about 1,400 employees.

Belo also said that the board will discuss the company's dividend strategy for 2009 at its September board meeting, though it did not say whether there would be a cut.

"Dividends represent a significant cash outlay on an annual basis and certainly are a potential source for preserving cash," Decherd wrote to shareholders. AH Belo pays out 25 cents per share for its quarterly dividend.

AH Belo shares fell 5.2 percent to $6.07.

Decherd noted that the company, which was spun off from broadcaster Belo Corp (BLC.N), had previously told shareholders that they would "enjoy the same dividend income after the spin-off."

"Therefore, the board is taking a careful approach in evaluating dividend policy, while clearly acknowledging that the current yield on (AH Belo's) stock price is unrealistically high and cannot be sustained over time," he wrote.

AH Belo also plans to determine whether it could sell some real estate, and has identified property that could generate pretax proceeds of $35 million.

Still, Decherd wrote to shareholders, AH Belo's leadership believes that the negative sentiment about the future of the newspaper industry is "exaggerated with regard to certain business issues and that the market is overreacting to a combination of secular and cyclical changes."

AH Belo reported a second-quarter loss of $3.2 million, or 16 cents per share, and revenue of $163.3 million, a 15 percent decline. In last year's quarter, the company reported net income of $12.3 million, or 60 cents a share.

Ad revenue performance fell on declines in classified revenue at The Dallas Morning News and The Press-Enterprise. (Editing by Brian Moss)