International Paper Nearly Doubles Annual Dividend Payout in Nine Years (IP)
By: Ned Piplovic,
After cutting its annual dividend payout nearly 70% in 2009, the International Paper Company (NYSE:IP) has boosted its annual dividend payout for the past nine consecutive years and currently offers its shareholders a 3.6% dividend yield.
The company started raising its dividend payout distributions immediately after the 2009 cut and recovered almost fully within two years. Over the seven additional years, the company increased its total annual payout amount almost six-fold and is currently 90% higher than it was in 2008 — the last full year before the dividend cut.
The company’s share price experienced moderate volatility and ended the trailing 12 months virtually flat. However, the share price advanced more than 13% over the past two years. While it might take a little time for the share price to work through some of the uncertainties, the steadily rising dividend payout income should be sufficient for investors to at least put International Paper on their watch list. The company has performed well and exceeded analysts’ earnings forecast in the last four quarters. As of August 2018, 56% of Wall Street analysts have a “Buy” rating or higher and the company’s current share price has more than 20% room still to rise before reaching analysts’ $64.50 average target price.
However, investors who are convinced that the share price will eventually resume its rising trend could take a position prior to the company’s next ex-dividend date on August 14, 2018, and collect a 3.6% dividend income while waiting for the share price to rebound. Acting before the ex-dividend date will ensure eligibility for the next round of dividend payouts on the September 17, 2018, pay date.
International Paper Company (NYSE:IP)
Headquartered in Memphis, Tennessee, and founded in 1898, the International Paper Company is one of the world’s leading producers of fiber-based packaging, pulp and paper. The company has approximately 52,000 employees operating in more than 24 countries throughout North America, Europe, Latin America, North Africa, India and Russia. North American operation still provides the vast majority of the company’s sales. Based on 2017 year-end numbers, the North American region’s revenues ($17.5 billion) accounted for nearly 80% of International Paper’s total global revenue of $22 billion. International Paper operates through three business segments. The Industrial Packaging segment manufactures containerboards, including linerboard, medium, whitetop and recycled medium cardboard stock. The Printing Papers segment produces printing and writing papers, such as uncoated papers for end use applications, including brochures, greeting cards, books and direct mail, as well as envelopes, business forms and file folders. This segment sells uncoated papers under several brand names, including Hammermill, Postmark, Accent and Great White. The Global Cellulose Fibers segment provides fluff, market and specialty pulps that are used in absorbent hygiene products, tissue and paper products and non-absorbent end applications.
The share price rose initially almost 20% over the first half of the trailing 12 month and reached its 52-week high of $65.08 on January 29. This increase was slightly higher than the rising trend over the previous 18 months. After peaking at the end of January 2018, the share price relinquished all those gains and fell to its 52-week low of $50.15 by June 19, 2018. Since bottoming out in mid-June, the share price regained some of those losses and closed on August 6, 2018, at $52.90, which was 2.6% lower than it was one year earlier but 5.5% above the 52-week low from June 2018.
The current $0.475 quarterly dividend payout is 2.6% higher than the $0.463 amount from the same quarter last year. This new quarterly dividend amount corresponds to a $1.90 annualized distribution and yields 3.6%, which is 5.6% higher than the company’s own 3.4% average yield over the past five years. Additionally, the company’s current yield is more than double the 1.77% average yield of the entire Consumer Goods sector and 53% above the 2.35% simple average yield of the Paper & Paper Products industry segment, as well as 22% higher than the 2.94% average yield of the segment’s only dividend-paying companies.
The company raised its total annual dividend payout amount almost six-fold over the past nine consecutive years, which translates to a 21.7% average annual growth rate. This rising dividend income managed to offset the slight share price decline and provide shareholders with minimal, but positive total returns of 1.5% over the past 12 months. The total returns over the past three and five years were 23% and 26%, respectively.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.