International Paper Hikes Dividend - Analyst Blog
International Paper (IP) hiked its quarterly dividend by 14% to 30 cents per share from the previous 26.25 cents. The increased dividend will be paid on December 17, 2012, to shareholders of record on November 15, 2012.
In addition, International Paper declared a regular quarterly dividend of $1.00 per share for the period from October 1, 2012, to December 31, 2012, on the cumulative $4.00 preferred stock of the company. This dividend will also be paid on December 17, 2012, to shareholders of record at the close of business on November 15, 2012.
International Paper had hiked its quarterly dividend by 40% to 26.25 cents per share in March last year from the previous 18.75 cents. Earlier, in April 2010 and January 2011, the company had twice hiked its quarterly dividend, thus raising the quarterly dividend payout substantially from 2.5 cents to 18.75 cents. This was a positive development for the shareholders, since the company had slashed its dividend by 90% to $0.10 in March 2009, in an effort to preserve cash due to the economic downturn.
International Paper ended the second quarter with cash and cash equivalents of $1.22 billion compared with $4 billion at 2011 end. Cash flow from operating activities improved to $1.4 billion during the quarter compared with $1.2 billion in the prior-year quarter.
International Paper has more than doubled its free cash flow compared with levels during the period 2000-2004. We expect International Paper to continue utilizing its sound cash flow by investing in capital projects, indulging in acquisitions, reducing its total debt and returning a greater proportion of cash to shareholders through an increased dividend.
Mergers and acquisitions remain International Paper's key strategy to strengthen its businesses over the long term. The acquisition of Texas-based Temple-Inland is its largest since it acquired Weyerhaeuser Co.'s (WY) corrugated-packaging business for $6 billion in August 2008. The company generated $60 million in synergies to date.
The transaction is expected to be accretive to EPS within one year of closing and incrementally beyond 2013. Moreover, the combination will strengthen the packaging business of North America by increasing its share in the corrugated packaging market to 34% from the current level of 27%. Furthermore, through its joint ventures, International Paper has significant projects underway in Russia and China, which will help the company sustain its earnings growth.
Memphis, Tennessee-based International Paper is a global paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia and North Africa. International Paper conducts its businesses through five segments: Printing Papers, Industrial Packaging, Consumer Packaging, Distribution (Xpedx) and Forest Products. Currently, the stock retains a Zacks #2 Rank, implying a short-term Buy rating.