International Paper (NYSE:IP) Is Due To Pay A Dividend Of $0.4625

International Paper Company's (NYSE:IP) investors are due to receive a payment of $0.4625 per share on 14th of June. The dividend yield will be 4.4% based on this payment which is still above the industry average.

View our latest analysis for International Paper

International Paper's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was higher than its profits, and made up 77% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 63%, which is in a comfortable range for us.

International Paper Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.20 in 2014 to the most recent total annual payment of $1.85. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though International Paper's EPS has declined at around 34% 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.

International Paper's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about International Paper's payments, as there could be some issues with sustaining them into the future. 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 4 warning signs for International Paper that investors should know about before committing capital to this stock. Is International Paper not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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