International Paper Co. (NYSE: IP – $44.64) said its Board of Directors has authorized a share repurchase program to acquire up to $2.0 billion of the company’s common stock. The new authorization is in addition to $430 million remaining as of the end of the third quarter from a previous repurchase program. During the third quarter the company repurchased about $200 million in common stock at an average price of $52.03 per share. The company’s Board also raised the quarterly common stock dividend by $0.025 per share or 5.3%, bringing the per share dividend to $2.00 annually. The new dividend is payable on December 14, 2018, to holders of record at the close of business on November 15. The increased payout will now yield investors 4.5% at current levels.
A recent pull-back in International Paper’s share price adds to its 3- to 5- year total return potential, which is supported by the solid dividend yield. According to the paper producer’s dividend policy, the payout will be 40%-50% of free cash flow. Based on my long-term projections, which include significant cash flow growth over the long haul, I look for steady increases in the quarterly dividend into early next decade. The depressed shares can continue to be held in income accounts that can accept some risk.