Business Service Companies Becoming Interesting: Deluxe Corporation (DLX), Pitney Bowes Inc. (PBI)

Many people believed that this was the case with Pitney Bowes and their $0.375 quarter dividend.  Most of the jump on earnings day was shorts covering their position because the company reaffirmed their dividend (the ex-date is Feb 15 for those looking to earn a cash payout) and highlighted that they still generate ample amounts of free cash flow from operations.  Pitney Bowes can easily afford to pay its dividend from this cash flow. Pitney Bowes generated full year 2012 free cash flow of $769M, while dividend payments were only $300M.  Basically, the dividend is here to stay, so while I do expect the drops in revenue to stabilize (and maybe even turn positive), the bigger attraction is the large (and safe) dividend.  As investors catch on to this, I do not expect the yield to stay at 10%.  The share price will be bid up to bring it back to a more appropriate level.

The article Business Service Companies Becoming Interesting originally appeared on Fool.com and is written by Chris Martin.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.