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Marc Tellier, chief executive of Yellow Media Inc., formerly Yellow Pages, shows the company's new logo at their head office Monday, March 22, 2010 in Montreal. (Ryan Remiorz)
Marc Tellier, chief executive of Yellow Media Inc., formerly Yellow Pages, shows the company's new logo at their head office Monday, March 22, 2010 in Montreal. (Ryan Remiorz)

Schizas' Mailbag

Yellow Media continues to disappoint Add to ...

Je voudrais savoir YLO que vas t'il faire durant les prochains mois et durant l'année. Merci pour la réponse,

Andre

Bonjour Andre,

I first posted on what is now Yellow Media Inc. on June 12, 2009 when it was still an income trust. At the time it was noted that the market for the directory business had to be called into question. Since then I have examined the case twice and both times it didn't seem to offer great prospects. The last analysis on February 25, 2011 outlined that the shares were testing support at $5.50 and could challenge $5.00. Subsequently it melted through $5.00 and has been trading below $4.00.

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Lets study the charts and see if there is a bottom developing.





The three-year chart tells the tale of what happens to a stock that fails to hold onto a long-term support level. For YLO support at $5.00 was its life line. Once that was breached the stock had no support until the $3.75 level, and not much there either.



The six-month chart paints an ugly portrait for investors that were enticed to chase the dividend. On February 25, 2011 the yield was 11 per cent. Currently the yield is 17 per cent, which looks unsustainable.



The stock is clearly in a downtrend and moves to the upside in March, April and May have met with resistance and failed to reverse the trend. There have been efforts to reassure investors by management, debt ratings agencies and analysts that cover the company, but all those attempts have been met by increased selling.



I have not liked the prospects for YLO for the last two years, given that the ink on paper directories business that had been the foundation of the enterprise has been facing increased competition from online sources. The hope back in 2009 was that the company could successfully transition to the digital domain and remain viable. It's not clear that they have met those goals.



In addition, YLO sold their Trader Corporation assets in March of 2011 for $745-million in order to pay down their debt and maintain the investment grade rating on their bonds. Recently there have been concerns that the deal might not close. The company has also seen some changes in management and insider selling which, given the circumstances, did little to boost confidence.



I would avoid chasing the dividend and look for better prospects.

Happy Capitalism!



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