Revenue and profits have been hard to come by for Lexmark International (LXK , which has missed Wall Street's sales projections in the past two quarters. Now, after the printing specialist has lowered its fourth-quarter earnings projections to a range of $1.05 to $1.15 a share, some 7% below consensus estimates of $1.24, it looks like it will be a while before Lexmark prints any real money for its shareholders.
However, the Lexington, Ky.-based company does pay a robust 36-cent quarterly dividend. Based on its current range in the neighborhood of $35.20, that means a dividend yield of about 4% annually -- more than twice the average 2% yield paid out by companies in the S&P 500 (SPX index.
Lexmark shares are will begin trading ex-dividend on Tuesday, when the company will set the roster of shareholders to whom it will make payments this quarter. Lexmark's dividend will go out on Dec. 11 to shareholders of record as of Nov. 27.
This will mark the eighth consecutive quarter during which Lexmark pays that same 36-cent dividend since it began paying a dividend four years ago. But shareholders who have held LXK shares for the past five years are down some 4% on their investment. And betting on the next five years could be even more costly. Lexmark's earnings are projected to decline by an average annual rate of 1% over that period. These projections include the 14% year-over-year estimated decline for fiscal year 2015, ending in December.
Those gloomy projections are in large measure due to the struggles Lexmark faces in its core Imaging Solutions & Services business, where third-quarter revenue plummeted 16%. Competition from the likes of Hewlett Packard (HPQ - Get Report) continues to weigh on Lexmark's sales. And to say nothing about the pressures the company faces from online and mobile document/photo viewing alternatives.
Given these factors, it should come as no shock that, despite its consensus hold rating, Lexmark has an average analyst 12-month price target of $31 -- more than $4 and 11% below where the shares trade today. From my vantage point, Lexmark would be better served to nix its dividend and preserve capital. As long as it keeps paying, though, investors should make a short term buy to grab those dividends -- but they shouldn't expect much more.