Monday, March 2, 2009

IP Cuts Dividend to 2.5 cents/sh

"International Paper said Monday that its board of directors has reduced the company's quarterly dividend to 2.5 cents a share from 25 cents. International Paper said it will preserve $100 million every quarter. "While our cash balances and cash flows remain solid, we believe it is prudent to manage cash conservatively in this uncertain economic environment," said Chairman and Chief Executive John Faraci."

When I pitched this stock, the large dividend yield at the time was a plus, but not a primary reason wanting to purchase it. IP further noted in their press release: "This decision, which reflects our strong commitment to maintaining our current credit ratings, is a proactive step to maximize our financial flexibility, along with our earlier decisions to reduce capital investment, decrease overhead spending and headcount, and freeze salaries." I still believe that we should hold on to IP despite having to stare at it so deep in the red. This is undoubtedly a position that might take our full investment-horizon of 1.5-2 years to come to fruition. It was historically low at 12.49 when we bought it. The company will be well-positioned when demand picks back up and when the market comes back.

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