Turning Point Brands (NYSE:TPB) Has Re-Affirmed Its Dividend Of US$0.06

The board of Turning Point Brands, Inc. (NYSE:TPB) has announced that it will pay a dividend on the 8th of July, with investors receiving US$0.06 per share. This means the annual payment will be 0.8% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Turning Point Brands

Turning Point Brands' Dividend Is Well Covered By Earnings

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. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 7.0%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 10%, which is comfortable for the company to continue in the future.

Turning Point Brands Is Still Building Its Track Record

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 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 8.4% a year over that time. Turning Point Brands has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Turning Point Brands has grown earnings per share at 16% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Turning Point Brands' Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Turning Point Brands you should be aware of, and 1 of them is a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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