Are These Dividends Safe? AstraZeneca plc (ADR) (AZN), Two Harbors Investment Corp (TWO), Windstream Corporation (WIN)

Pitney Bowes Inc. (NYSE:PBI)

At a first glance it appears that Pitney is easily able to cover its dividend form EPS. The company paid out a dividend of $1.52 on EPS of $2.22 during 2012.

On a quarterly basis, Pitney has been able to cover its dividend consistently every quarter, which gives the company the best record of coverage in the group. The dividend has been covered by earnings at least once in every quarter resulting in an average 5-yr dividend cover of one-and-a-half times.

Before the cash flows are considered, I must say that I believe Pitney operates within a dying industry and therefore even though dividends are well covered now, the company’s revenues are in terminal decline and future dividends should not be taken for granted.

That said, Pitney has been able to cover its dividends well from cash flow over the last four quarters. In addition, the company has a good cash balance so any short falls can be easily covered. Indeed the company used this cash balance to repay debt in the second quarter of 2012.

Pitney passes this test now but I believe future dividends will come under pressure.

Overall

So, out of these 4 contenders only two, AstraZeneca and Pitney Bowes pass the dividend test. That said, I believe Pitney’s dividend could come under pressure soon as the company grapples with falling revenues and declining sales.

Out of these four stocks, AstraZeneca is the only company that I believe will be able to sustain its dividend.

Data Source: Motley Fool CAPS, MarketWatch

The article Are These Dividends Safe? originally appeared on Fool.com and is written by Rupert Hargreaves.

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