Inter Parfums' (NASDAQ:IPAR) Shareholders Will Receive A Bigger Dividend Than Last Year
Inter Parfums, Inc.'s (NASDAQ:IPAR) dividend will be increasing from last year's payment of the same period to $0.75 on 29th of March. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average.
View our latest analysis for Inter Parfums
Inter Parfums' Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Inter Parfums' dividend was only 52% of earnings, however it was paying out 183% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Over the next year, EPS is forecast to expand by 9.4%. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was $0.48, compared to the most recent full-year payment of $3.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Inter Parfums has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Inter Parfums has seen EPS rising for the last five years, at 23% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
Our Thoughts On Inter Parfums' Dividend
In summary, while it's always good to see the dividend being raised, we don't think Inter Parfums' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Inter Parfums that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
