Leading packaging and paper manufacturer International Paper Company (IP) increased its quarterly dividend by 17% year over year to 35 cents per share. The fourth quarter 2013 dividend is payable in cash on Dec 16 to shareholders of record at the close of business on Nov 15.
Based on the closing price of $38.56 on Sep 6, 2013, the proposed dividend offers a yield of 2.84%. A steady dividend payout is part of the long-term strategy of International Paper to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been one of the company’s most attractive features.
At the same time, management authorized a share repurchase program to purchase common shares worth $1.5 billion over a period of 2-3 years in open market transactions. Historically, International Paper has consistently returned significant cash to its shareholders through dividends and share repurchases.
The current dividend increase and share repurchase authorization further reflects the inherent strength of International Paper’s business and due diligence of management to generate long-term profitability and sustainable free cash flow.
Headquartered in Memphis, TN, International Paper has manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. The company employs approximately 70,000 people and is strategically located in more than 24 countries serving customers worldwide.
International Paper is currently working toward transforming and improving the profitability of its distribution business, xpedx. Improvements are expected in procurement, replenishment orders, reduced stock keeping Units (:SKU), and supply chain (including fewer/larger warehouses). The company is also mulling to integrate the entire platform into a single operating system.
All these initiatives are expected to double profits. Started in 2011, the company is at the initial stages of this multi-year program. We believe that these initiatives will boost results and be accretive to earnings going forward.
International Paper presently has a Zacks Rank #3 (Hold). Other players in the market worth mentioning include PH Glatfelter Co. (GLT), KapStone Paper and Packaging Corp. (KS), both carrying Zacks Rank #1 (Strong Buy), and Rock-Tenn Co. (RKT) that retains a Zacks Rank #2 (Buy).