Will Pitney Bowes 2% Dividend Survive?

Pitney Bowes has delivered 30 years of dividend increases but we are not as optimistic about it reaching its 31st year in 2013 and even less optimistic about it reaching its 32nd year in 2014. PBI's first dividend increase was in 1983 and it increased its per share dividend every year at rates exceeding 10% which resulted in its annualized split adjusted dividend climbing from $.10/share in 1982 to $1.14/share in 2000 and represented a compounded annual growth rate of 14.4%. The good news is that Pitney Bowes has increased its dividend every year since then in spite of its inconsistent financial performance.

The bad news is that its cumulative dividend increase was only 31.6% over the last 12 years and this represents a compounded annual growth rate of 2.315% during this time period. Pitney Bowes has cut its capital expenditures by 40% since 2007, its free cash flows have remained stagnant due to declining revenue and operating cash flows. Even though Pitney Bowes has 2-1 dividend coverage right now based on its adjusted free cash flows, it does not guarantee that management won't cut the dividend in order to shore up its credit rating in the wake of negative credit rating actions taken by Fitch, Moody's and S&P.

Source: Seeking Alpha

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