Pitney Bowes: A Strategy For This Dividend Champion

We recently wrote an article highlighting some of the reasons it might make sense to take a position in Pitney Bowes Inc (PBI). We will recap a few of those reasons. The stock falls under the "dividend champion category" for it has consecutively raised its dividends for 30 years. Insiders also seem to be showing some interest as they purchased roughly 54,000 shares from the 14th of May to the 9th of June in the $13.51-$14.52 ranges.
Investors now have a chance to get into this stock at a price that is lower than that paid by the insiders. However, there is an even better strategy to leverage one's position in this stock for a relatively low fee. In essence, it involves selling a put and using the proceeds to purchase a call. This strategy offers investors the opportunity to leverage their position for a relatively low fee.
Additional reasons to like Pitney Bowes
Net income has increased for the past 3 years in a row
A positive levered free cash flow of $661 million. As its annual dividend payments amount to $317 million, it has no problems with meeting the payments and plenty of room to continue raising them. Cash flow per share has increased from 3.92 in 2009 to $4.31 in 2011
It has a great free cash flow yield of 25%
A manageable payout ratio of 65%
A very good yield of 10.8%
While it faces competition from Stmaps.com (STMP), DYMO Endicia (NWL) and United States Postal Service, Pitney Bowes' pbSmartpostage is the clear market leader in electronic stamps and labeling and it should be able to hold onto this position in the years to come.... Read more