If you work in any high rise office building or any corporate building for that matter, you’re probably familiar with either Cisco or Lexmark for their office products. Lexmark specializes in the creation and supply of office products such as color printers, cartridges, and other office solutions. The company was founded in the early nineties and is run out of their headquarters in Kentucky.
Currently, Lexmark International boasts a 4.68% yield with a payout ratio of only 41.9%. They’ve only been growing their dividend for five years but with a payout ratio so low, they’ve still got quite a bit of room to grow that dividend payout and stand as a steady stream of income for many dividend growth investors.
LXK has already announced their ex-dividend date for the quarterly payout of dividends. The ex-dividend date for the stock is February 25th and will be in the amount of $0.36/share. As this date is coming up and with a yield as high as it currently has, it’s more than clear that this stock needs to be reviewed further to see if this is a golden goose in the making.
As of 2/18/2016, the stock is listed at $30.75/share which is low for their 52 week rolling average of $24.11-47.69. This would appear to be a very fair price to buy in if the company numbers look good after the sheets have been reviewed. Price isn’t everything but I like to think that as dividend growth investors, we should always be looking for the deals that Mr. Market decides to make for us when he’s having his random mood swings.
I’ll admit, when I first started reviewing Lexmark, I was brought in by the high dividend yield, upcoming ex-dividend date, and discounted price. When I reached their financials however, I was not as impressed. Over the last few years, they have had some ups and downs on their income statement. It doesn’t appear that they can find their feet as they seem stalled out when it comes to bringing in more income from their services and 2015 didn’t seem to change those numbers. It’s also questionable that 2016 will be any different from the projected numbers that appear to be on their way. Things don’t get any better when you move to their balance sheet or their cash flow. They seem to be cursed with ups and downs and their cash flow just seems to be running away from them. Their operating cash seems to drive a solid line straight across their sheets and their investing and financing appears to be doing the very same thing. I can’t help but be bored by their lack of movement in any particular direction.
Lexmark received a slight bump this week as analysts gave it an upgrade (for whatever reason). This gave the stock a nice boost that it needed to try to survive Mr. Market’s attempt to squash them. This was a huge plus for the company stock as they had previously been placed in the underperform category by analysts that must have seen how their sheets had stalled out for quite some time. It’s unclear why the analysts would decide to give it an upgrade lately and as much digging as I am doing into this company, I can’t find a reason for it other than to spur a price rally for it. Not being one to trust analysts, I won’t be pushed into a better direction with this stock simply because they have ruled it so but it also doesn’t seem that there are a large number of bad articles on the company which is good for business (or bad? Any publicity is good publicity… right?).
Over all I am on the fence about this company but I will admit that I’ve never been more bored by a review of a company before this. I got my tension risen by the high dividend yield and the upcoming dividend that I could still hitch a ride onto with the low price that it’s currently trading at but the sheets leave much to be desired. With almost no direction being clear for the company, this is almost like the unknown race horse walking onto the track for the first time. I can’t figure out whether the company is in the works to finally find a solution to their stalled out earnings or if they simply hope to fade into the background of office products/solutions. Unfortunately for this company however, I don’t intend on placing my bet on their horse at this time. The stock at this time just feels too risky and too unclear on where it wants to go. I’ll be placing it on the hold list for now and we’ll see where it decides to go in due time.