Even Google Inc (NASDAQ:GOOG)’s adwords is a competitor because of its massive online advertising reach. Direct mail is an old way of reaching people, Adwords is the new way. While Pitney Bowes’ massive customer base gives it a chance to take on both Stamps.com and Constant Contact, keeping up with Google Inc (NASDAQ:GOOG) would be nearly impossible. In fact, businesses small and large make extensive use of Google’s ad network. And, that network is quickly extending into the mobile arena, where its mobile operating system is one of two main competitors. Pitney Bowes simply can’t offer that kind of reach and likely never will.
While online advertising is a growing category, it probably won’t completely replace mail, so Pitney Bowes Inc. (NYSE:PBI) may be able to incorporate aspects of Google’s business into its own. While it probably wouldn’t earn revenue off those advertisements, it would at least get to retain customers that might go elsewhere. Google Inc (NASDAQ:GOOG), meanwhile, would likely be happy to have Pitney Bowes essentially selling its services for it.
Wild Card?
While the company continues to work through its difficult transition, it is also breaking in a new CEO. New leaders often lead to big changes, particularly when a company is struggling. The new chief executive spent a great deal of time at International Business Machines and has relevant experience. So his addition could be a good long-term event. However, the dividend wasn’t increased at the normal time, supposedly to give the CEO time to review the business and come up with strategic plans.
It’s never a good thing when a company that has a long history of dividend increases stops increasing its dividend. A cut doesn’t always come next, but when combined with a new CEO, that risk increases. Indeed, it will be easier to make that cut now than to admit it is needed later. Avon was in a similar situation before its disbursement was trimmed.
A Whole Lot Going On
There’s a whole lot going on at Pitney Bowes. With so many moving parts, it’s hard to figure out where the company will end up. While there are positive things happening in both the legacy business and with its new initiatives, dividend focused investors are probably better off elsewhere. Those willing to take on the risks, however, could find the shares trading higher over the long term, even if the dividend gets cut. That is, of course, assuming the company’s positive momentum continues.
The article 10% + Yield With Plenty of Promise And Risk originally appeared on Fool.com and is written by Reuben Gregg Brewer.
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