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The board of Turning Point Brands, Inc. (NYSE:TPB) has announced that it will pay a dividend of US$0.06 per share on the 8th of July. This payment means the dividend yield will be 0.8%, which is below the average for the industry.
Check out our latest analysis for Turning Point Brands
Turning Point Brands' Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. However, Turning Point Brands' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
EPS is set to fall by 7.0% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 10%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Turning Point Brands Doesn't Have A Long Payment History
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2018, the dividend has gone from US$0.16 to US$0.24. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Turning Point Brands has been growing its earnings per share at 16% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Turning Point Brands Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Turning Point Brands might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Turning Point Brands has 2 warning signs (and 1 which is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.