Why are newspapers stocks still issuing dividends?

No one who follows the newspaper industry is unaware of the historic meltdown in share prices and market cap. McClatchy, AH Belo and Lee have all declined well below market caps of 1/2 a billion. Despite this crushing value loss, all of the companies have retained their dividend at the same rate as it was in better times. Lee even recently confirmed its intent to pay the next quarter's dividend.

This has pushed up dividend yields for some of the companies in excess of 20%. The only recent company to announce a dividend cut was GateHouse, which is close to bankruptcy and nearly delisted from the stock exchange.

The important question is: Why are these companies so hell bent on maintaining an unsustainable dividend? All things being equal, and assuming zero growth in share value, a 20% dividend would cash out all of the share value in 5 years.

The greatest concern here is what a dividend indicates. It more or less says, management doesn't have an core growth options in which to invest capital. Investors should take their cash and use it elsewhere.

To be fair, cutting a dividend is a tricky matter at it usually will push share values even lower. However, if these companies will ever grow, they need to start investing the cash they use for the dividend rather than returning it to shareholders. They should find more to spend on than severance packages, and need to find core revenue growth.