Dividend Investors: Don't Be Too Quick To Buy Pitney Bowes Inc. (NYSE:PBI) For Its Upcoming Dividend

Pitney Bowes Inc. (NYSE:PBI) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Pitney Bowes' shares before the 18th of November in order to receive the dividend, which the company will pay on the 6th of December.

The company's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Last year's total dividend payments show that Pitney Bowes has a trailing yield of 2.6% on the current share price of US$7.66. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Pitney Bowes

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Pitney Bowes reported a loss last year, so it's not great to see that it has continued paying a dividend. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Pitney Bowes didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 42% of its free cash flow as dividends, a comfortable payout level for most companies.

Click here to see how much of its profit Pitney Bowes paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Pitney Bowes reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Pitney Bowes's dividend payments per share have declined at 12% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Get our latest analysis on Pitney Bowes's balance sheet health here.

Final Takeaway

Should investors buy Pitney Bowes for the upcoming dividend? It's hard to get used to Pitney Bowes paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Although, if you're still interested in Pitney Bowes and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 3 warning signs for Pitney Bowes (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.