Icahn Companies (NASDAQ: IEP) has been every dividend investor’s dream. Although the exact payout has fluctuated, the company has returned a steady stream of cash to shareholders since 2005. Currently, the dividend yield is almost 24%, which has given many investors pause for thought.
But can the company really afford to support a dividend yield above 20% in 2024?
Will Icahn Enterprises really pay a 20% dividend this year?
Icahn Enterprises is controlled by legendary investor Carl Icahn. While his investing style can be volatile, he is undeniably one of the best to ever do it. For example, since 2000, Icahn Enterprises stock has nearly matched the performance of Warren Buffett’s stock. Berkshire Hathaway. That’s even considering Icahn Enterprises has shares lost 55% of its value since the beginning of 2023.
Carl Icahn is to Icahn Enterprises what Warren Buffett is to Berkshire Hathaway. That is, Icahn invests the company’s money in various business ventures. For decades, rather than keeping all the profits, he has chosen to return capital to shareholders in the form of a quarterly dividend. From 2019 to mid-2023, the dividend was $2 per share. It has since been lowered to $1 per share.
If the current dividend policy is maintained, Icahn Enterprises will pay $4 per share in dividends this year. That would cost the company about $1.8 billion based on its current share count.
Will Icahn Enterprises actually continue these dividend payments? It is not certain that this is possible. Note that the company’s total market cap is only $7.5 billion. That’s higher than its net asset value of just $5 billion. The company has roughly $2.5 billion in cash on hand, plus another $2.5 billion in escrow cash, so the dividend is still technically feasible. But beyond 2024, the company will struggle to maintain its current dividend barring a sudden increase in the value of its investments.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
How much will Icahn Enterprises pay out in dividends this year? was originally published by The Motley Fool
