Standard & Poor's appears set to complete its quarterly review of the S&P/TSX Composite index at the end of next week and UBS expects newspaper chain Torstar Corp. (TORSF.PK), to get lost in the shuffle.

"[Torstar appears] vulnerable to deletion for failing to satisfy the requirements for continued inclusion," UBS strategist Garry Cooper said in a note Wednesday.

We are all so past being wowed by the market’s capacity to careen. There’s Torstar (TORSF.PK) with a 9.5% dividend. Canadian Oilsands (COSWF.PK) is now forecast to pay a 15.6% annual distribution. Bank of Montreal's (BMO) dividend yield is at 8.4%. Spectra Energy (SE) is north of 7%, and it runs a pipeline business. “Highly rated” JP Morgan (JPM) bounced above 6.5%. Even Royal Bank (RY) and Manulife (MFC) have inched up to ~5.6%.

All I keep thinking is: most people have neither the capital nor the conviction to enter at these levels. But, with the S&P 500 now 52% off its 2007 high, these dividend levels have arrived with all of the grace and nuance of a 24 pound newborn.

Torstar Corp. (TORSF.PK), which publishes the Toronto Star, has been the subject of two analyst downgrades in the past week because of its exposure to what many see as a prolonged slowdown in advertising spending.

Following the company's recent release of its third quarter results, Scotia Capital analyst Paul Steep lowered his rating on the media company to ‘sector underperform’ based on his view that “[it] faces an uphill battle against cyclical and secular trends.”

Those secular trends include a bleak economic outlook for the province of Ontario, the key market for Torstar’s flagging newspaper businesses.

On Monday, RBC Capital Markets analyst Drew McReynolds dropped his rating on Torstar to "underperform."

While conceding that no media stock will be immune to an advertising slowdown, Mr. McReynolds said Torstar is particularly vulnerable because 70% of its revenue is exposed to newspaper publishing. Declining readership and ad dollars will combine with rising newsprint prices to put considerable pressure on margins the next two years, he said.

While there would likely be upside to Torstar shares in a “break-up” scenario, Mr. McReynolds said he believes that outcome is unlikely in the near future because the company would first shed its investments in CTVglobemedia Inc. or Black Press Ltd.

RBC Capital has released a list of stocks on the S&P/TSX Composite Index it claims will have the most “predictable” positive performance.

“Predictability factors tend to perform well during low earnings growth environments or periods of high market volatility,” RBC analyst Chad McAlpine said in a note on Wednesday. The list was produced using RBC's proprietary computer models and boasts “defensive, high-quality names ... they offer strong growth profiles at attractive valuations,” he said.

So there you have it. Torstar shares are now sporting a 7% yield, with the stock down 3.5% in early trading. With the Q2 results due on July 31st, is the market telling us that a dividend cut — or suspension — is all but assured (see prior post “And then the bottom fell out on Torstar shares” May 8-08)?

Last time I checked, Fairfax Financial (FFH) held 12,532,200 Class B shares (18.2% of the Class B’s outstanding), with the last 5MM or so being acquired in April 2007. Let’s guess that the cost base is C$20. The stock is down 47% since then, so, as of Monday, Fairfax’s paper loss is looking like C$125 million.

I know that most of you are tech stock holders, but you can’t help but ask yourself what is going on with the good ship Torstar [TSX:TS.B](TORSF.PK). A 4% one-day drop is not something we are used to seeing in mid cap land, particularly when the stock in question is of the “value” kind.

The recent first quarter results were tough, reflecting the world of many newspaper proprietors. Restructuring charges, layoffs, a net loss. None of it good for the stock.

Torstar Corp. (TORSF.PK) shares were down more than 9% Wednesday after the company reported disappointing first quarter results.

The company said earnings in the quarter hit C40.09 per share, which is well below consensus estimates that called for C$0.22 per share. Earnings before interest taxes, depreciation and amortization, meanwhile, dropped 25% year-over-year.