(By Rich Bieglmeier) S&P calls Pitney Bowes Inc. (PBI
) a Dividend Aristocrat. The business equipment market is one of the select group of "large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years."
A show of hands, how many of you received a raise for at least 25 years in a row? That's what we thought.
Pitney Bowes stock price has been under assault because their business has been tightly tied to snail mail at a time when teenagers, drivers, the dude shopping in front of you… are walking like zombies, if not just stalled clogging up sidewalks, streets and shopping aisles, head down, twiddling their thumbs on wireless devices and oblivious to the world around them.
Of course, PBI is trying to adjust to avoid eventual extinction. In the most recent 10Q, management wrote "We expect our mix of revenue to continue to change, with a greater percentage of revenue coming from enterprise-related products and solutions. We also expect to continue to roll out digitally-based products and services but do not expect them to have a significant impact on our revenues for 2012."
The company believes its forays into software, integrated online and direct mail marketing using their Volley cloud platform will be growth drivers going forward. Clearly Pitney Bowes has some competitive advantages to enter into the market with well-established clients, but for our purposes, iStock is more concerned with PBI's ability to maintain its dividend of more than 10%/
If PBI can maintain its $1.50 per share, per year dividend, and continue to hike the output as it has for 30 straight years, then any appreciation in the stock price is a bonus.
Although revenues fell from $5.6 billion in 2009 to $5.3 billion in 2011, free cash flow increased from $889 million in 09 to $962 million in 10 and finished at $1.03 billion in 2011. In the past three years, shareholders have received dividend payments of $1.44, $ 1.46, and $1.48 in 20119, 2010, and 2011 respectively. As we mentioned earlier, the payment now stands at a rate of $1.50.
As a percent of GAAP eps from continuing operations, Pitney Bowes paid out 69% in 2009, 97% in 2011, and 85% in 2011. For the first six months of 2012, PBI has $ 248.1 million in net income from continuing operations and paid out $150.8 million in dividends to shareholders or 60.7%.
Based on the current trend in payout ratio to income from continuing operations, iStock believes Pitney Bowes Inc. (PBI) dividend is safe for now and will remain an Aristocrat. If only they could do something about this guy texting and driving in front of me.