Diebold (NYSE:DBD) has long been an attractive buy based on the excellent dividends that it pays, and has been paying, for nearly 60 years. As the human race moves boldly into the future and companies like Bank of America (NYSE:BAC) continue to come up with more self-service solutions for banking, Diebold - a company that is based around financial self-service and security - has performed and grown well enough to consistently raise dividends.
As a matter of fact, the dividends - represented by symmetric and consistent line of D's at the bottom of the chart - have really been the selling point for the company. The stock, bouncing back and forth between 20 and the 50's, has really been all over the place since its last split in 1997.
Diebold has performed rather stagnantly in the midst of an extremely bullish market in 2013. It's up, but only around 7% for the year. Short term buyers over the last three months, however, have yielded nearly 13%. Most of the recent growth has been attributed to cost cutting and semi-bullish guidance for 2014 on the company's Q3 earnings call.
However, there's a dividend trend that seems to curiously foreshadow the company's future growth as indicated by the last two years of dividends.
After growing its dividends at decent rate with some consistency over the last 12 years, Diebold has shown some signs of potent regression, only raising its dividends less than a penny (from .28 to .2875) over the span of two years - from 2011 to now.
This is comparable to what was becoming a somewhat standard minimum of raising its dividend a penny a year, as it did from 2003 through to 2010.
Those investing in Diebold strictly for its dividend have to see this as the dividend potentially being in jeopardy, as the company's free cash, margins and profit are all down in 2013.
According to an article on CrainsCleveland.com, the company's employees are already starting to feel the crunch that Diebold is getting into - shareholders could be next:
In April, Diebold announced a "global realignment plan" to cut costs by $100 million to $150 million by the end of 2015. That plan is still in place.
Mr. Mattes, who joined Diebold in June, said 2013 was a foundation-building year and that a lot of the heavy lifting will take place in 2014. Cost reductions will continue, and Diebold will see the results of its voluntary early retirement plan. That offer just closed, but Mr. Mattes told investors it had a take rate of at least 40%. The company also let about 700 employees go - the majority of those reductions had taken place by the time the plan was announced - and enacted a pension freeze in 2013.
Another red flag is that the company's CFO, Bradley C. Richardson, is leaving without any specified reason - immediately after posting a Q3 loss and settling a $48MM case with the SEC related to alleged violations of the Foreign Corrupt Practices Act.
Although shorting the company isn't likely to be the best solution, due to having to pay the dividends, going long puts could help you capitalize on a coming Diebold correction. Additionally, if you're looking for fundamental shorts that you can use as hedges against macro market pullbacks, this could be one to add to that list. The company is trading at around 17 times forward earnings - not exactly dirt cheap.
In any event, there isn't a strong argument to go long Diebold right now, and it should be taken off the table as a potential long position. If you decide not to short it, better leave Diebold alone - tough times could be ahead for shareholders.