International Flavors & Fragrances (NYSE:IFF) Is Paying Out A Dividend Of $0.40

The board of International Flavors & Fragrances Inc. (NYSE:IFF) has announced that it will pay a dividend on the 11th of July, with investors receiving $0.40 per share. This means the dividend yield will be fairly typical at 2.0%.

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Estimates Indicate International Flavors & Fragrances' Dividend Coverage Likely To Improve

We aren't too impressed by dividend yields unless they can be sustained over time. While International Flavors & Fragrances is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 19%, which we would be comfortable to see continuing.

See our latest analysis for International Flavors & Fragrances

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $1.88 in 2015 to the most recent total annual payment of $1.60. This works out to be a decline of approximately 1.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. International Flavors & Fragrances' earnings per share has shrunk at 53% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

International Flavors & Fragrances' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for International Flavors & Fragrances that you should be aware of before investing. Is International Flavors & Fragrances not quite the opportunity you were looking for? Why not check out our selection of top 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.