International Flavors & Fragrances (IFF) is set to make its shareholders rich in the form of dividend payment. On May 3, 2017, the company announced its 2Q17 dividend of $0.64 per share on outstanding shares. The dividend is expected to be paid on July 7, 2017, with a record date of June 26, 2017. Its peer, Sensient Technologies (SXT) paid a dividend of $0.30 per share.
International Flavors & Fragrances’ 2Q17 dividend of $0.64 represents 14.30% growth compared to 2Q16. Since 2012, International Flavors & Fragrances’ dividend has grown at a CAGR (compound annual growth rate) of 7.9%, which is marginally lower than its peer Sensient Technologies’ dividend growth of 8% for the same period.
Free cash flow
Free cash flow is very critical for a company—it can be used for various purposes like expansion and debt repayment. Usually, dividends are paid out of free cash flows. To know if International Flavors & Fragrances’ free cash flow is good enough to support its dividend growth, we’ll consider the company’s free cash flow and convert it into free cash flow per share for our analysis.
Since 2012, International Flavors & Fragrances’ free cash flow per share has grown at a CAGR of 20.5%. It outpaced dividend growth for the same period. As a result, International Flavors & Fragrances’ free cash flow is strong enough to support its dividend growth.
Investors can invest in International Flavors & Fragrances indirectly by investing in the iShares U.S. Basic Materials ETF (IYM), which has invested 1.8% in the company. The fund’s top holdings include Dow Chemical (DOW) and DuPont (DD) with weights of 11.7% each as of June 14, 2017.
In the next part, we’ll look at International Flavors & Fragrances’ current dividend yield and dividend payout.