Important news for shareholders and potential investors in International Paper Company (NYSE:IP): The dividend payment of US$0.50 per share will be distributed to shareholders on 14 June 2019, and the stock will begin trading ex-dividend at an earlier date, 24 May 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine International Paper's latest financial data to analyse its dividend characteristics.
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What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
- Its annual yield is among the top 25% of dividend payers
- It consistently pays out dividend without missing a payment or significantly cutting payout
- Its dividend per share amount has increased over the past
- It can afford to pay the current rate of dividends from its earnings
- It has the ability to keep paying its dividends going forward
High Yield And Dependable
International Paper currently yields 4.4%, which is high for Packaging stocks. But the real reason International Paper stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you're investor who wants a robust cash inflow from your portfolio over a long period of time.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. In the case of IP it has increased its DPS from $0.10 to $2 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. This is an impressive feat, which makes IP a true dividend rockstar.
The company currently pays out 46% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect IP's payout to remain around the same level at 42% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.6%. In addition to this, EPS should increase to $4.99.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
International Paper's strong dividend attributes make it, without a doubt, a stock dividend investors should be considering for their portfolios. However, given this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for IP’s future growth? Take a look at our free research report of analyst consensus for IP’s outlook.
- Valuation: What is IP worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether IP is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.