International Paper (NYSE:IP) Has Announced A Dividend Of $0.4625
The board of International Paper Company (NYSE:IP) has announced that it will pay a dividend on the 16th of September, with investors receiving $0.4625 per share. This makes the dividend yield 4.2%, which will augment investor returns quite nicely.
View our latest analysis for International Paper
International Paper's Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was higher than its profits, and made up 77% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.
Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 58%, which is in a comfortable range for us.
International Paper Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $1.40 in 2014 to the most recent total annual payment of $1.85. This implies that the company grew its distributions at a yearly rate of about 2.8% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Dividend Growth Potential Is Shaky
The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. International Paper's earnings per share has shrunk at 34% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about International Paper's payments, as there could be some issues with sustaining them into the future. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 4 warning signs for International Paper that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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