Pitney Bowes (PBI) did not have a good quarter in terms of revenue. It did keep its dividend high-- we will talk about that later-- but revenue is down. Sales dropped 5.1% from the previous year. Lower equipment and supplies sales have caused the decline in revenue as lower mail volume and fewer meters are now in service. With a slow economic recovery, Pitney Bowes is seeing larger companies holding back on investing in new equipment and keeping current equipment longer. This has a huge impact on revenue. And it is not the only company experiencing this. Xerox (XRX) and Hewlett Packard (HPQ) are experiencing flattening out revenue also. Corporate buyers are cautious. But is this the real reason Pitney Bowes has lost so much value in its stock lately?
IT'S THE MAIL STUPID!
Pitney Bowes is the world's largest seller of postage meters, devices that allow companies to print postage on letters rather than using stamps. While postage meters are in continual demand by any business that sends a lot of mail, direct mailing is being increasingly displaced by internet and this limits PBI's growth opportunities within its core market. I believe this is the real problem and investors know it.
The U.S. Post Office is a shrinking entity, and unfortunately, one of Pitney Bowes' larger customers. Almost every segment of the company has shown a year-over-year decline in revenue. Postal Meters are a decaying phenomenon but the past champion of sales for Pitney Bowes. Being tied to the shrinking U.S. Post Service, investors are wondering where the company is going to go and are driving shares of the company steadily downward.
For years, the company was a growth stock. As time changed it needed to morph also and it did, into an income stock with very attractive dividends. The dividend yield is 8.93% and that is not something to ignore!
Yet, I believe investors in general are just not certain of the company's future and where it can go from here. This is what I believe is one of the main catalysts driving down the stock price. So investors are wrestling with an uncertain future. Isn't the attractive dividend enough to keep investors on board? Some maybe, but why don't I just put my income investment in a REIT right now that is paying about the same and may have a more certain future?
An investor must believe the management can restart growth and redefine where the company is headed.