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Is International Paper (IP) a Good Pick for Income Investors?
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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
International Paper in Focus
International Paper (IP - Free Report) is headquartered in Memphis, and is in the Basic Materials sector. The stock has seen a price change of -10.25% since the start of the year. Currently paying a dividend of $0.94 per share, the company has a dividend yield of 3.65%. In comparison, the Paper and Related Products industry's yield is 1.56%, while the S&P 500's yield is 1.78%.
In terms of dividend growth, the company's current annualized dividend of $1.90 is up 2% from last year. International Paper has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 8.88%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, International Paper's payout ratio is 42%, which means it paid out 42% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for IP for this fiscal year. The Zacks Consensus Estimate for 2018 is $5.21 per share, which represents a year-over-year growth rate of 49.28%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, IP presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Is International Paper (IP) a Good Pick for Income Investors?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
International Paper in Focus
International Paper (IP - Free Report) is headquartered in Memphis, and is in the Basic Materials sector. The stock has seen a price change of -10.25% since the start of the year. Currently paying a dividend of $0.94 per share, the company has a dividend yield of 3.65%. In comparison, the Paper and Related Products industry's yield is 1.56%, while the S&P 500's yield is 1.78%.
In terms of dividend growth, the company's current annualized dividend of $1.90 is up 2% from last year. International Paper has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 8.88%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, International Paper's payout ratio is 42%, which means it paid out 42% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for IP for this fiscal year. The Zacks Consensus Estimate for 2018 is $5.21 per share, which represents a year-over-year growth rate of 49.28%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, IP presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).