Mailing and document authority Pitney Bowes (NYSE: PBI), a Motley Fool Income Investor recommendation, presented its fourth-quarter and year-end results on Wednesday. Global Business Services performed especially well, with a 16% increase in revenues and a 48% increase in earnings (before interest and taxes). The Capital Services asset unfortunately saw a 5% decline in earnings, before interest and taxes; it will be the subject of a spin-off expected to occur this year.
For the fourth quarter, consolidated net sales revenues rose 7% to $1.5 billion. Operating income increased 8.4% to $211.3 million. Net income was $93.6 million ($0.41 per diluted share) compared to $82.7 million ($0.35 per diluted share) in the year-ago timeframe, giving the company a cool 13% earnings growth.
For the full year, consolidated net sales revenues increased 10.8 % to $5.5 billion. Operating income rose 24% to $867.1 million. Net income was $526.6 million ($2.27 per diluted share) versus $480.5 million ($2.08 per diluted share) for all of 2004, an appreciation of 9.6%.
Looking at the GAAP operational cash flow for 2005, operational activities generated $540 million, a whopping decrease of 43%. Free cash flow (as defined by operating cash flow minus expenditures for capital projects) was $248 million, a decrease of 60%. This is a concern because that calculation implies that there could be pressure on the dividend in the future if operating cash flows stay at those low levels.
The company, however, obviously has confidence that it can increase operating cash flow. For one thing, it has authorized a $0.04 increase in its annual dividend, bringing the new payout to $1.28. Checking Pitney Bowes' dividend history, we see that recent increases haven't been as outstanding as in the past. Still, Pitney Bowes is willing to dole out more of the green to shareholders and is buying back stock.
Pitney Bowes is a great company and an important brand in the mailing solutions industry. It's a consistent dividend payer and generates some attractive cash flow. And it's been a resilient investment over the last five years, especially if dividends are consistently reinvested along the way. Going forward, the company should do well with its business and acquisition strategies (here's the latest), but it seems to me that smart Fools should wait for a drop in the shares.
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Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.
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