Team Murdoch must be feeling the pinch, a little, as News Corp has just revealed it’s upping its dividend for the first time in two years, and as the biggest shareholders, Rupert and the family, will benefit.

News Corp said in its second-quarter and first-half earnings report that it was raising its quarterly dividend by 25%, the first increase in two years, and will pay 7.5 US cents per share.

That should make 30 US cents a share in a full year, assuming no further increases. If this keeps up, News may be embarrassed by having a dividend yield of more than 1% (currently 0.8% before the higher dividend). Oh, the ignominy of being considered an income stock!

In fact it could signal that Murdoch is abandoning the growth spiel and now going to build earnings from his existing businesses.

There was no explanation in the statement for the sharp lift in payout to shareholders. But News had traditionally kept dividends low, claiming that it was a “growth” company and shareholders received their rewards through the rising share price.

In 2008 and early 2009 that wasn’t the case as News shares tanked with the rest of the market, but News Corp shares jumped 51% in the big market rally from March through December last year.

With about 36% of the company’s shares, the Murdochs will take in about $US70 million for the quarter. This is on top of the substantial payments that already flow to Rupert and James Murdoch, the presumptive heir.

Rupert Murdoch received $A24.5 million in 2008-09. Somehow, that doesn’t seem to be all that much, does it? A higher dividend was obviously needed.

The higher dividend will hardly going to break the bank at News, earnings per share jumped to 25 US cents, from 15 US cents a share before the Valassis payout of $US500 million, which was “go away” money shuffled out in a short statement by News last Sunday morning.

Earnings per share after the payment of that half a billion bucks in cash were still 10c a share, which covers the higher payout. The payout was actually cut by tax to $US315 million, so US taxpayers financed $US185 million of News’s payment to its one-time legal adversary, which is what happens with settlements of this kind.

Even though the settlement was announced at the end of January, one month into the third quarter, the cost has been taken against a booming second quarter result. Does that mean with Avatar and all the earnings surge from Cable, newspapers and TV this quarter, that Rupert Murdoch wants a clean earnings sheet to show the full profit potential on the empire?

News said net profit for the December quarter was $US254 million, or 10 cents a share (after the Valssis payment), compared to a net loss of $US6.4 billion from the same quarter of 2008 when it wrote down the value of the $US5 billion-plus purchase of Dow Jones, publisher of the Wall Street Journal by half.

Ignoring the half-a-billion settlement, News Corp earned a second quarter operating profit of of $US1.2 billion, an increase of 44% compared with segment operating income of $US839 million reported a year ago.

The company’s cable networks profit were the real powerhouse, with 35% boost in second-quarter earnings. News said Fox News achieved its “highest ever quarterly profit” with operating income rising 51%.

News Corp’s newspaper division profits rose 30% from improvements in advertising revenue at its Wall Street Journal and cost cuts throughout the division. Print ad sales at the Journal rose 5% and online ad sales rose 17%. But News’ digital strategy still looks a crock with earnings contribution from the company’s digital media division, primarily the fading MySpace, down another $32 million from December 2008.

News Corp’s Australian newspapers reported lower second-quarter operating income, in local currency terms, due to 5% fall in advertising revenues, reflecting reduced classified advertising. News said Australian circulation revenues, in local currency terms, were down 3% as well, compared with the corresponding quarter. “‘The reduced revenue contribution was partially offset by lower operating expenses,” the company said.