Icahn Enterprises (NASDAQ:IEP) has been every dividend investor’s dream. Although the exact amount of the payment has fluctuated, the company has paid a steady stream of cash to shareholders since 2005. Currently, the dividend yield is almost 24%, which has led many investors to consider it. take note.
But can the company really afford to sustain a dividend yield above 20% in 2024?
Will Icahn Enterprises actually pay a 20% dividend this year?
Icahn Enterprises is controlled by a legendary investor Carl Icahn. Although his investing style can be volatile, he is undeniably one of the best to ever do it. Since 2000, for example, Icahn Enterprises’ stock has almost matched the performance of Warren Buffett’s. Berkshire Hathaway. This even takes into account that Icahn Enterprises shares have lost 55% of its value since the start 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, instead of retaining all profits, it chose to return capital to shareholders in the form of a quarterly dividend. From 2019 until mid-2023, the dividend was $2 per share. It has since been reduced to $1 per share.
If the current dividend policy is maintained, Icahn Enterprises will pay $4 per share in dividends this year. This would cost the company approximately $1.8 billion based on its current share count.
Will Icahn Enterprises actually follow through on these dividend payments? It is not certain that this is possible. Note that the company’s total market capitalization is only $7.5 billion. That’s more than its net asset value of just $5 billion. The company has about $2.5 billion in cash, plus another $2.5 billion in restricted cash, so the dividend is still technically viable. But beyond 2024, the company will have difficulty maintaining the current dividend, unless there is 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 ranks and recommends Berkshire Hathaway. The Mad Motley has a disclosure policy.
How much will Icahn Enterprises pay out in dividends this year? was originally published by The Motley Fool
