International Paper's (NYSE:IP) Dividend Will Be $0.4625

International Paper Company's (NYSE:IP) investors are due to receive a payment of $0.4625 per share on 17th of March. This means the annual payment is 3.3% of the current stock price, which is above the average for the industry.

View our latest analysis for International Paper

International Paper's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS is forecast to expand by 154.4%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 70% which brings it into quite a comfortable range.

International Paper Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $1.40, compared to the most recent full-year payment of $1.85. This works out to be a compound annual growth rate (CAGR) of approximately 2.8% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Is Doubtful

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. It's not great to see that International Paper's earnings per share has fallen at approximately 9.8% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

An additional note is that the company has been raising capital by issuing stock equal to 52% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

International Paper's 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. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for International Paper you should be aware of, and 2 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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