Turning Point Brands' (NYSE:TPB) Dividend Will Be Increased To $0.07

Turning Point Brands, Inc. (NYSE:TPB) has announced that it will be increasing its dividend from last year's comparable payment on the 12th of April to $0.07. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

See our latest analysis for Turning Point Brands

Turning Point Brands' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. 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.

Over the next year, EPS is forecast to expand by 14.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

Turning Point Brands Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the annual payment back then was $0.16, compared to the most recent full-year payment of $0.28. This works out to be a compound annual growth rate (CAGR) of approximately 9.8% a year over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Turning Point Brands to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Turning Point Brands has impressed us by growing EPS at 11% per 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

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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