The thirst for yield in a world bled dry by ultralow interest rates was exemplified Tuesday by enormous demand for Apple’s new bond issue. But another signal came that day from a decidedly lower-tech company: Pitney Bowes .
The postage-meter maker’s stock was the S&P 500’s worst on Tuesday, slumping by almost 16%. First-quarter earnings before exceptional items that missed the consensus estimate by 2 cents didn’t help.
But the bigger issue may well have been Pitney’s announcement that it was cutting its dividend in half.
Back in December, Pitney’s stock fell to a multi-decade low just above $10, implying a dividend yield north of 14%. With an installed base of meters still needing supplies of high-margin ink, Pitney had been generating respectable free cash flows to fund payouts. Clearly, though, the dividend was at risk since snail mail isn’t making a comeback.
But that didn’t stop the stock rising to more than $16 before Tuesday’s tumble. Even after that, it is still up a third from December and, despite the unkind cut, the dividend yield remains more than 5%.
Investors in a desert will seemingly lap up whatever they’re offered—even ink.