Dividend for 1Q18
International Flavors & Fragrances (IFF) has declared its regular cash dividend for 1Q18 to common equity shareholders. It hasn’t made any changes to its dividend rate from last year and will pay a dividend of $0.69 per share. Peers Sensient Technologies (SXT), Clorox (CLX), and Estée Lauder (EL) have paid 1Q18 dividends of $0.33, $0.84, and $0.38 per share, respectively.
IFF’s dividend will be paid to shareholders of record as of March 26, 2018. It expects to pay the dividend on April 6, 2018. At the end of 2017, IFF had approximately 79 million outstanding shares. Assuming IFF didn’t buy back any shares before the record date, it would be paying ~$54.4 million in dividends. In 1Q17, IFF paid $50.7 million in dividends.
Free cash flows
International Flavors & Fragrances has been consistently generating positive free cash flows for many years. Its dividend has grown at a CAGR (compound annual growth rate) of 14% since 2013. Strong free cash flow is required to sustain this kind of dividend growth since free cash flows are generally used to pay dividends.
IFF’s dividend payment as a percentage of free cash flow has been increasing from 31.9% in 2013 to 78.7% in 2017. If a higher percentage of free cash flows are used to pay dividends, IFF could be left with little free cash flow for other financing activities such as repayment of debt, expansion, and so on. However, the current free cash flow is strong enough to support the dividend growth.
Investors can invest in International Flavors & Fragrances indirectly by investing in the iShares U.S. Basic Materials (IYM), which has invested 1.6% in the company.