According to the graph on Pitney Bowes’ website, Pitney Bowes has either maintained or raised its dividend every single year since 1982 when it was $0.10 to 2012 when it was $1.50.
On one hand, based on Pitney Bowes’ website it is also clear that Pitney Bowes’ dividend yield is a strong selling point for the company. That means that Pitney Bowes’ leadership may fear that a reduction in the dividend may cause income-seeking investors to dump the stock.
On the other hand, the street has praised companies that have cut their dividends such as Telefonica S.A. (ADR) (NYSE:TEF) – a company that eliminated its dividend altogether – as long as they can adequately explain how they are creating shareholder value by doing so.
So with a new CEO at the helm, it is going to be interesting to see what happens to Pitney Bowes’ dividend and how the street reacts. Will he announce a growth plan and suspend the dividend? Will he merely announce a restructuring plan? Will he attempt to cut costs in order to protect margins and cash reserves and maintain the dividend? Will he announce a turnaround? Will Pitney Bowes take a few pages out of IBM’s playbook?
The Decision
I decided to hold onto my shares of Pitney Bowes and closely monitor the company. After all, like many other tech companies, there is a lot of uncertainty surrounding Pitney Bowes, which could be good or bad – we just don’t know yet. I decided to give the new CEO some time before I make a decision because I feel that this company has the potential to be a lot more than just a “mail company.”
3 Factors to Consider
1). The Leadership Team. The management team is the most critical consideration. Do you believe in Pitney Bowes’ new CEO, Marc Lautenbach, a former IBMer, and his team? Are insiders purchasing shares?
2).The Dividend. I still feel that it is likely that it will remain at $1.50, unlikely that it will get slashed in half, and very unlikely that it will get hacked.
3). The Road Ahead. What plans and new initiatives does Pitney Bowes’ new CEO announce? What is his vision for the company? How will Pitney Bowes leverage its relationships with Google and Facebook?
My Foolish Take
I suggest waiting to see what happens with this company over the next 3 – 6 months. Unlike many other analysts, I do not believe that Pitney Bowes is going to whack its dividend (which would not necessarily be a bad thing). After all, Pitney Bowes’ business is stabilizing and next year the company should earn more than enough to cover its dividend.
Furthermore, Pitney Bowes has the opportunity to grow alongside Facebook and Google in digital marketing and emerge as a leader in that rapidly growing space. That market should eventually catalyze profitable growth for Pitney Bowes. And growth in profits from social media and online marketing should more than offset declining profits from its mail business.
Overall, there is a lot of uncertainty surrounding Pitney Bowes. That means volatility. Fortunately, because too many negative expectations are already built into Pitney Bowes’ share price any moderately positive news should result in a nice pop. That could happen if the dividend is assured, if the next quarter is positive, or if the new CEO articulates some sort of plan! So you may also want to consider taking profits if and when the stock gets a nice pop.
The article A Controversial High Yield Stock originally appeared on Fool.com and is written by Ryan Peckyno.
