International Paper announces 9.8% dividend cut in 2021

International Paper Co (NYSE: IP) has announced a dividend cut of almost 10 percent to $0.4625 per share. This ends a streak of 11 years of annual dividend increases by the paper packaging company. IP did not announce a dividend hike in 2020 and last raised its dividend in 2019 with a small 2.5% increase.

International Paper today announced its board of directors has authorized a share repurchase program to acquire up to $2 billion of the company's common stock. The new authorization is in addition to $1.3 billion remaining as of the end of the third quarter from a previous repurchase authorization. During the third quarter the company repurchased approximately $212 million in common stock at an average price of $59.13 per share. The company intends to continue repurchasing such shares in open market transactions. The company's board of directors also decreased the quarterly common stock dividend by $0.05 per share or 9.8%, which brings the per share dividend to $1.85 annually.

A new annualized dividend rate of $1.85 per International Paper share yields 3.5% at a stock price of $53. 

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"Returning cash to shareowners through dividends and share repurchases is a meaningful part of our capital allocation framework," said Mark Sutton, Chairman and Chief Executive Officer. "Today's announcement reflects our confidence in International Paper's long-term outlook and strong free cash flow generation. We are committed to a competitive and sustainable dividend of 40 to 50% of free cash flow. The dividend adjustment we are making is consistent with our dividend policy and is well below the 15 to 20% adjustment we anticipated when we announced the spin-off of our printing papers business late last year. Additionally, share repurchases will continue to complement dividends with a consistent and thoughtful cadence that's underpinned by a commitment to maximize value creation."

International Paper Company is a producer of renewable fiber-based packaging, pulp and paper products. International Paper has manufacturing operations in North America, Latin America, North Africa and Europe. IP produces corrugated packaging products that protect and promote goods and enable worldwide commerce, and pulp for diapers, tissue, and other personal hygiene products that promote health and wellness. The company is headquartered in Memphis, Tenn. and employs approximately 38,000 people. Net sales for 2020 were $21 billion.