Dividend Stock Analysis: International Paper Company (IP)

This morning, with a cup of coffee in hand, I was excited to perform research to identify a potentially undervalued dividend growth stock to consider investing in during the coming months.As a result of this desire to perform a stock analysis, I will take a deeper dive into International Paper Company (IP).

Who is International Paper Company?

International Paper Company (“IP”) is one of the largest producers of packaging products, pulp for diapers, tissue, hygiene products, and papers.To dive further, IP has three major segments:Packaging and container board (61% of revenue), Papers (19% of revenue), and Cellulose Fibers (12% of revenue).

One other thing that stands out about the company is their commitment to the environment.In the company overview, a significant number of the slides highlight the company’s commitment to using renewable energy, sustaining forests, and doing the right thing.If you are an investor looking to invest in socially conscious companies, IP appears to fit the bill.

Financial Review – Balance Sheet and Income Statement

The company released their 2018 results and 2019 outlook in January.The results were excellent.From an earnings perspective, the company’s adjusted earnings per share grew significantly to $5.32 per share from $3.49 per share. The leading driver of this growth was a strong increase in sales.Sales grew $1.5b, or 7.2%, over the twelve-month period.That out-paced the growth in SG&A ($.75b) and SG&A ($.1b).Not surprisingly, the company’s EBITDA and ROIC sky-rocketed, a point that was highlighted in the linked earnings presentation.

The income statement appears great.So I will not spend a ton of time covering the results.Instead, I’ll move on to review IP from a balance sheet perspective using the 12/31/18 10-K.Let’s start with the current ratio.We review the current ratio to determine if a company’s short term assets cover their short-term liabilities. As of 12/31/18, the company had a current ratio of 1.49X ($6,996m/$4,694m).This is slightly lower than the company’s 12/31/17 current ratio of 1.61X ($8,227m/$5,102m).Regardless of the decrease, the company still far exceeds the metric of 1X that we look for.

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Disclaimer: I do not recommend any decision to the reader or any user, please consult your own research. Thank you.

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