1 Media-Related Company That Is Not What it Seems

Thomson Reuters Corp. (TSX:TRI)(NYSE:TRI) is not what it seems. For a company associated with the media industry, the 3% dividend payer has more to offer.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If there has ever been a company that I was wrong about regarding its operations, that company would be Thomson Reuters (TSX:TRI)(NYSE:TRI). I always thought of this company as solely a news organization, which, I have to say, has kept me away from it more than drew me to it. It is really only because of the growing, approximately 3% dividend that I even decided to take a look at this company.

I started looking into Thomson Reuters with a biased view. I was under the firm impression that this was one of those residual media firms that would be facing stiff competition from online news formats, the kind of competition that is putting pressure on newspaper businesses and other traditional news providers in general. It turns out this line of thinking is certainly incorrect.

While Thomson Reuters does operate a traditional media division, the total media segment of the business provides only 20% of its total revenue base. Media consists of two operating segments: News and Global Print. The News segment contributes 6% of revenues and Global Print provides only 14, a much smaller portion that I originally suspected.

As a result, the potential negative impact of a potentially declining news business is not as relevant as I first suspected. Besides, these segments only represent two of the company’s five segments. It is the rest of the company operations that are really interesting.

Thomson Reuters remaining three divisions, Legal Professionals, Tax Professionals, and Corporates provide the majority of its revenues. These are areas of its business that I didn’t even know existed before I began to look more deeply into the company.

The Tax Professionals segment, for example, provides 14%, the same as its global print division. The Corporates segment provides 23% of its revenues and Legal Professionals provides 43%. Instead of being highly pressured by technological change, the business may, in fact, be insulated from these pressures, which may, in the long run, lead to higher revenues and earnings.

While the financial results were not that amazing in the second quarter, it is possible that most of the negative results were the result of one-time costs resulting from the company’s strategic repositioning. Overall, the company increased revenues 2% year over year. It was operating profit (down 6%), adjusted EPS (down 11%), and free cash flow (down 4%) that seemed particularly negative.

The upcoming Q3 results may provide more clarity as to the company’s performance, once the repositioning costs have begun to filter through. This company is much more interesting than it first appeared. Its 3% dividend initially drew my eye, but it is the sources of its revenues that make this stock much more appealing. The fact that the majority of its revenues are from sources other than media makes the investment case that much more attractive.

That being said, the fact that its earnings and revenues were falling in the first quarter is something of a concern, especially when the stock is not terribly cheap (trailing P/E of 36) at these prices. Therefore, it would be prudent to wait and see how the company performs for a few quarters after the one-time costs filter through before entering a position.

Should you invest $1,000 in Thomson Reuters right now?

Before you buy stock in Thomson Reuters, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Thomson Reuters wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kris Knutson has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Practically Perfect Canadian Stock Down 24% to Buy Now and Hold for Life!

CNR stock is a top Canadian stock for investors, especially with shares down on the TSX today.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $30,000

If you have $30,000 you're willing to invest, these are some of the first Canadian stocks to consider on your…

Read more »

rail train
Dividend Stocks

What to Know About Canadian Pacific Railway Stock for 2025

CP stock has now gone through a major merger, so what do investors have to look forward to?

Read more »

ways to boost income
Dividend Stocks

Top Canadian Value Stocks I’d Buy for Dividend Growth and Appreciation

If you are looking for income and capital appreciation, here are three Canadian value stocks for a great total return…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Canadian Stock to Buy With $2,000 Right Now

The company’s powerful combination of growth, income, and value, positions it well to deliver solid returns, making it a smart…

Read more »

Transparent umbrella under heavy rain against water drops splash background. Rainy weather concept.
Dividend Stocks

This 10.6 Percent Dividend Stock Pays Cash Every Single Month

Are you looking to invest for a rainy day? This 10.6% dividend stock pays cash every month, irrespective of the…

Read more »

A worker gives a business presentation.
Dividend Stocks

Market Dip: Opportunity or Risk This April?

This market dip might have investors worried, but should they be excited instead?

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Why I’d Add This Top TSX Dividend Stock to My TFSA During the Current Dip

The market is full of volatility right now. Fortunately, this top TSX dividend trades at a discount and pays a…

Read more »