Paper Manufacturer Hikes Quarterly Dividends 2.7%, Pays 3.3% Yield
By: Ned Piplovic,
An international paper and packaging company raised its quarterly dividends distribution 2.7% to boost its yield to 3.3%, while still delivering double-digit percentage share-price growth.
The stock rose more than 20% and its combined total return from asset appreciation and dividends distribution approached 30% during the past 12 months. Additionally, the company has raised its annual dividend payout for the last eight years.
The company, International Paper Co. (NYSE:IP), will pay its next quarterly dividend on December 15, 2017, to all its shareholders of record as of the Nov. 14 ex-dividend date.
International Paper Company (NYSE:IP)
Founded in 1898 and headquartered in Memphis, Tennessee, the International Paper Company operates as a paper and packaging company in North America, Europe, Latin America, Russia, Asia, Africa and the Middle East. The company operates through four segments: Industrial Packaging, Global Cellulose Fibers, Printing Papers and Consumer Packaging.
The Industrial Packaging segment manufactures containerboards, linerboard and saturating kraft paper. The Global Cellulose Fibers segment provides fluff, as well as market and specialty pulps that are used in absorbent hygiene products, tissue products and non-absorbent applications. Additionally, the Printing Papers segment produces printing and writing papers, such as uncoated papers, including brochures, pamphlets, greeting cards, books, envelopes, business forms and file folders. This segment sells its products under the Hammermill, Springhill, Williamsburg, Postmark, Accent, Great White, Chamex, Ballet, Rey, Pol and Svetocopy brand names. The Consumer Packaging segment offers coated paperboards for various packaging and foodservice uses. Products in this segment include food, cosmetics, pharmaceuticals and tobacco products under the Everest, Fortress, and Starcote brand names. This segment also produces cups, lids, food containers and plates.
The company advanced its quarterly dividends payout by $0.0125, or 2.7%, from last quarter’s $0.4625 payout to the current $0.475 distribution. The current annualized dividend amount of $1.90 is equivalent to a 3.3% dividend yield. This current yield is identical to the company’s five-year average dividend yield. However, International Paper’s current yield is significantly higher than the average industry yield. The company’s 3.3% yield is 86% higher than the Consumer Goods sector’s 1.76% average yield and 73% above the average yield of all the companies in the Paper & Paper Products segment.
International Paper started paying dividends in 1946 and has raised its dividend for eight consecutive years. During that time, the company grew its annual dividend by an average rate of 24.7% per year. Because of the exceptional growth rate, the company enhanced its total annual dividend payout almost six-fold since 2009.
The share price dropped more the 7% in the last two weeks of October 2016 before it closed at $43.60 on November 3, 2016, which was the stock’s 52-week low point. After hitting the bottom, the share price ascended 18% over the next month. Following the quick spike, the share price experienced some volatility and went through a couple of up-and-down cycles. Eventually, the share price embarked on a steady 60-day uptrend in mid-May 2017 and rose to its new 52-week high of $57.17 by July 17, 2017. This high was short lived as the priced started falling immediately and lost 10% by August 10, 2017.
However, the share price has been rising since that most recent drop and has recovered all those losses. The closing price of $58.14 on October 17, 2017. is just $0.03, or 0.05%, below the July 52-week high. Additionally, the price has risen 33.3% above the 52-week low from November 2016 and is 23.6% higher than it was one year ago.
The rising dividend income, aided by asset appreciation, has compensated International Paper’s shareholders handsomely for the past several years. The one-year total return stands at 28.5%, with the total return figures for the last three and five years coming in at 37.5% and 75.2% respectively.
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