PBI) is the poster child of a dividend in peril. The company, which is best known for its postage meters, actually has a rich history of paying dividends, having raised its payout every year since 1983. That said, recent action in the stock suggests the market believes this streak could soon come to an end. The shares are down 24%, year-to-date, and are currently changing hands around $14.14 (which works out to a 10.7% dividend yield, based on the quarterly payment of $0.375 a share). Pitney's 2012 consensus earnings estimate of $2.02 a will allow management to cover the annual dividend 1.3x. However, the company's earnings are expected to decline the next three years; which should come as little surprise to anyone who's been keeping up to date with the current financial state of the U.S. Postal Service.
In the meantime, Pitney has 7x more debt on the balance sheet than cash and $825 million of the borrowings coming due over the next two years. With few identifiable catalysts, I believe the action of the underlying stock will continue to deteriorate the benefit of the company's dividend, for as long as management can afford to pay it. RR Donnelley ( RRD) is another stock who's 8.8% dividend yield may not be as attractive as initial glance, after taking a closer look at the company's underlying fundamentals. At $11.82, the shares have fallen 18%, year-to-date, more than offsetting any potential benefit of the dividend income. Again, the story at RR Donnelley is similar to what it is at Pitney Bowes: a declining core business. In this case, the company operates in commercial printing, where both volume and pricing have been weak for several quarters. RR Donnelley can currently cover its quarterly dividend of $0.26 a share at 1.7x of expected full-year earnings. However, the company's profit is expected to be flat at best over the next few years and the stock is not attracting many investors -- even though it is trading at 6x expected full-year earnings. In the meantime, RR Donnelley has 10x more debt than cash on its balance sheet and its bonds have been designated with a Junk rating by S&P. Declining earnings and a high debt load should be red flags for investors looking at stocks with above-average dividend yields. As a result, Pitney Bowes and RR Donnelley could soon find their payouts on the chopping block.