International Flavors & Fragrances (NYSE:IFF) Is Paying Out A Dividend Of $0.81

International Flavors & Fragrances Inc. (NYSE:IFF) will pay a dividend of $0.81 on the 5th of October. This makes the dividend yield 4.6%, which will augment investor returns quite nicely.

Check out our latest analysis for International Flavors & Fragrances

International Flavors & Fragrances' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. International Flavors & Fragrances is unprofitable despite paying a dividend, and it is paying out 312% of its free cash flow. This makes us feel that the dividend will be hard to maintain.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 13%, which makes us pretty comfortable with the sustainability of the dividend.

International Flavors & Fragrances Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.36 in 2013 to the most recent total annual payment of $3.24. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though International Flavors & Fragrances' EPS has declined at around 59% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

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 stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for International Flavors & Fragrances that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.