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Turning Point Brands (NYSE:TPB) Is Paying Out A Larger Dividend Than Last Year

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Turning Point Brands, Inc.'s (NYSE:TPB) dividend will be increasing to US$0.06 on 8th of April. Even though the dividend went up, the yield is still quite low at only 0.7%.

Check out our latest analysis for Turning Point Brands

Turning Point Brands' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Turning Point Brands' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 6.2% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 10%, which we are pretty comfortable with and we think is feasible on an earnings basis.

historic-dividend
historic-dividend

Turning Point Brands Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2018, the first annual payment was US$0.16, compared to the most recent full-year payment of US$0.24. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Turning Point Brands has been growing its earnings per share at 12% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Turning Point Brands' prospects of growing its dividend payments in the future.

Turning Point Brands Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Turning Point Brands that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.