An Insider Just Bought 5% Yielding Pitney Bowes Inc. (PBI)

There are two kinds of peers for Pitney Bowes Inc. (NYSE:PBI) in our book: business equipment manufacturers RR Donnelley & Sons Co (NASDAQ:RRD) and Xerox Corporation (NYSE:XRX), and high yielders Frontier Communications Corp (NASDAQ:FTR) and CenturyLink, Inc. (NYSE:CTL). R.R. Donnelley is another popular short target, with over 30% of the float held short here as well, and it’s also cheap in terms of earnings with a forward P/E of 7. However, earnings fell 28% in the first quarter of 2013 versus a year earlier. At current dividend levels, the yield is almost 8% but those payments do seem risky. Xerox has been improving its net income, but this has come entirely through margins with revenue slipping 3% in its most recent quarter compared to the same period in the previous year. Still, it is a prospective value play at 10 times trailing earnings.

Frontier and CenturyLink are both telecommunications companies. Frontier cut its quarterly dividend to 10 cents per share in early 2012, though its current yield is close to 10%. Short sellers are responsible for 24% of the float, but the cash flow situation does not appear too bad and so while risky it might be worth investigating for income investors. Quarterly payments were reduced by about a third earlier this year at CenturyLink, though this has still left it with a dividend yield of over 6%. Revenue numbers have not been good, and CFO has been down as well, but at least for now there seems to be enough cash flow after investing activities to maintain significant dividends and share repurchases.

Of course, further declines in these telecoms’ businesses would certainly lead to lower dividends so any high yields might be only a short to medium term factor in their favor. While the insider purchase at Pitney Bowes is certainly interesting, bears also seem confident judging by the high short interest and so even if the combination of a low earnings multiple and a high yield is appealing investors should be careful when further evaluating the company and may want to hold off on any action until more numbers come in.

Disclosure: I own no shares of any stocks mentioned in this article.