Then Print Some Dividend Increases, Why Don't You?!
Kindles, iPads and Nooks might be the latest rage (and here to stay), but it's no secret that we don't live in a completely paperless world yet.
And leading the pack in terms of business printing solutions is Xerox (XRX). As of this year, according to International Data Corporation, the company ranks number one for managed print and basic print services.
Unfortunately, its frontrunner marketshare status hasn't translated into stellar market performance.
Year-to-date, shares have lost 20.13%. That's better than the business industry's slightly worse loss of 22.74%. But no matter how you cut it, the company's stock is tanking.
That's all the more reason to take one look at Xerox's lackluster dividend program and run the other direction.
The company's been doling out dividends for 35 years. But not only has it been severely short on increases, it took a sledgehammer to its program in 2000 - smashing the quarterly payment down from $0.20 to its original 1977 payout of just $0.05.
It's barely repaired its dividends since. In fact, including its long-time-coming and most recent 35% increase, its quarterly payment stands at $0.0575, or $0.23 annualized.
Yes, that gives it a decent 2.73% projected yield. And yes, the stock's trading at a bargain at 6.7 times earnings. But does any of that make up for the lifeless dividends? Not by a long shot.
Pulp Fiction or Dividend Reality?
Chalk it up to me having a one-track mind, but I have one more paper-dependent dividend-payer lined up for you today …
It began giving shareholders some love in 2005, following the company's newfound independence. That doesn't give us a lot to go on.
Neenah Paper's raised its dividend only three times, including its most recently announced increase from $0.12 to $0.15, or $0.60 annualized.
Granted, the increases have come in consecutively, which at least implies the possibility of momentum. But three years is hardly enough time to establish reliability.
Having said that, Neenah Paper's dividend payout ratio of 19.4% means there's no reason why the company couldn't keep on growing that dividend for years to come.
What's more, the company has outperformed year-to-date - gaining 11.38% versus 9.11% for the paper and paper products industry. And it's trading at vastly lower valuations, with a P/E of 10.1 compared to the industry's 36.5.
Long story short, Neenah Paper's outperformance, low valuation and moderate 2.4% yield might appeal to income investors willing to stomach a bit more risk. Caveat emptor, as always.