Thomson Reuters Corp (NYSE:TRI) is a Canadian-American media conglomerate with a global reach. It encompasses several long-standing businesses, including Reuters Group (founded in 1851) and Thomson Corporation (founded in 1989).
The company reached record highs over the past year as recognition has grown that its media and information services are virtually indispensable. But does that mean Thomson Reuters stock is a buy?
Not only does it run a largely business-to-business (B2B) business model that has more predictable revenue, but it also pays a healthy $1.62 annual dividend per share. That dividend payment was off to a shaky at the start of 2021, but returned in a big way by year end.
Its newswires and information databases like Westlaw provide value for both enterprises and governments. That makes it a crucial part of the foundation of media.
Thomson Reuters: The Original Decentralized Org
Both Thomson and Reuters were prestigious companies heading into their April 2008 merger. The combination created an information powerhouse, including newspapers and legal research subsidiaries of The Thomson Corporation with stock information and news media resources of Reuters Group. A series of mergers and acquisitions have followed in subsequent years.
This merger created antitrust worries in both North America and Europe because both companies are heavily involved in data collection, research, and distribution.
It’s an interesting evolutionary twist because the company was initially decentralized to keep information free for everybody. Long before blockchain technology created decentralization buzz, the Reuters Principles stated, “Reuters shall at no time pass into the hands of any one interest, group, or faction.”
Of course, that was put aside for the merger, and the Woodbridge Company is the majority shareholder with over 53 percent of the combined company in its possession.
And its majority-centralized ownership structure has some wondering if it’s still as trustworthy of a data source and corporation.
A Financial Juggernaut That Keeps On Chugging
Thomson Reuters grew about 450 percent to become a $55 billion company since the 2008 merger that created it. It even grew revenues by one percent during the pandemic, as media outlets generally suffered. Not only that, but it made the necessary adjustments to raise operating profit by 67 percent to $1.92 billion in the initial pandemic year.
It raised its cash flow by over one billion dollars in that timeframe, and it continued its growth trajectory through 2021. By the third quarter earnings statement in November, company revenue was up six percent with full-year guidance estimated near five percent.
The company is trading at a bit of a premium compared to other companies in the sector, and that could keep all but the more conservative of investors away. It’s not by any means a sexy brand, but the media juggernaut continues to deliver a steady performance that makes it a reliable dividend stock, especially for those who want holdings in the sector.
Share Buyback a Tailwind For TRI Share Price
While it may be pricey, Thomson Reuters has the fundamentals to back it up. It produced $534 million in operating cash flows in the last quarter with about $1.2 billion in cash flow over the past 12 months. It will continue to grow shareholder value through its $1.2 billion stock buyback program to make up for the $0.49 loss per share for the most recent quarter.
Already $1.1 billion of those shares have been bought back, and that means EPS should rise and in turn TRI share price has the potential to increase next year due to the smaller pool of outstanding shares, all else being equal.
Steve Hasker, President and CEO of Thomson Reuters, said. “We are focused on building a leading content-driven technology company, and our talented teams continue to work ambitiously towards that goal. I am very pleased with our achievements to date and believe we are well positioned to build on this progress.”
Thomson Reuters: What Could Go Wrong?
Although deeply embedded in the business intelligence sector, Reuters isn’t without competition.The likes of Bloomberg, Dow Jones, S&P Global, Pearson, and the Associated Press, FindLaw, and LexisNexis all elbow in on its territory.
There is also high dependency on social media communities, newsletters, and decentralized outlets for news. Several movements have already rallied against paywalls in support of freedom of information, and services like Westlaw and LexisNexis have reportedly high prices that leave a gap for cheaper solutions to seize market share.
We’ve already seen that happen with Bloomberg’s expensive terminal being upended by the flood of free information available on other sites.
Is Thomson Reuters a Buy: The Bottom Line
Thomson Reuters is a global media conglomerate based in Toronto, Canada and majority owned by The Woodbridge Corporation. Its data feeds provide real-time information on markets, business, politics, and more. It also owns a wide array of data sources and distribution platforms, making it an integral part of any research.
It has a slow, but steady, growth rate and dividend that should keep conservative investors happy. Day traders looking to make a profit won’t care much for this slow-moving option, but those looking for a safe place to store their money long term could find a worse place to put it.
This stock isn’t volatile, which could be a good or bad thing, depending on what your portfolio needs. Either way, it’s a solid media company to consider holding long term.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.