Turning Point Brands (NYSE:TPB) Has Affirmed Its Dividend Of $0.065

The board of Turning Point Brands, Inc. (NYSE:TPB) has announced that it will pay a dividend on the 5th of January, with investors receiving $0.065 per share. Including this payment, the dividend yield on the stock will be 1.1%, which is a modest boost for shareholders' returns.

View our latest analysis for Turning Point Brands

Turning Point Brands' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Turning Point Brands' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 73.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

Turning Point Brands Doesn't Have A Long Payment History

Turning Point Brands' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2017, the dividend has gone from $0.16 total annually to $0.26. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. Turning Point Brands has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Turning Point Brands' EPS has fallen by approximately 11% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Turning Point Brands' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Turning Point Brands has 3 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.