Will Icahn Enterprises’ stock dividend increase due to strong growth in the United States?
Investors love to follow smart money. Invest like Warren Buffett and maybe you will get rich like him. The big complaint against Buffett and his company Berkshire Hathaway Inc. (NYSE: BRK.B) is that its stock does not pay dividends. Buffett loves investing in dividend-paying companies and reaping the quarterly rewards, but to his fierce followers nothing. All they get is profit from capital appreciation. One in two is not bad.
If you want to take advantage of sparkling dividends and see your initial investment grow, you may want to consider Icahn Enterprises LP (NYSE: IEP).
Led by investment legend Carl Icahn, who has a reported net worth of $ 15.0 billion, Icahn Enterprises is a diversified holding company engaged in eight operating segments: investment, energy, automotive, food packaging, metals, real estate , drugstore and home fashion. (Source: âInvestor Presentation: May 2021â, Icahn Enterprises LP, last accessed June 23, 2021.)
The Investment division is the largest, valued at $ 10.2 billion, followed by energy ($ 4.9 billion), automotive ($ 3.0 billion), food packaging ( $ 471.0 million), metals ($ 233.0 million), real estate ($ 494.0 million), home fashion ($ 224.0 million). million) and Pharma ($ 322.0 million).
Some of the company’s holdings are Western Oil Company (NYSE: OXY), CVR Energy, Inc. (NYSE: CVI), Brands Newell Inc (NASDAQ: NWL), Herbalife Nutrition Ltd. (NYSE: HLF), and Xerox Holdings Corp. (NYSE: XRX).
Over the years, Icahn has bought what he believes to be dumped businesses, upgraded their operations, and sold them.
In 2017, Icahn Enterprises LP sold American Railcar Leasing LLC for $ 3.4 billion, resulting in a pre-tax gain of $ 1.7 billion.
In 2018, the company sold Federal-Mogul for $ 5.1 billion, resulting in a pre-tax gain of $ 251.0 million; Tropicana Entertainment for $ 1.5 billion, resulting in a pre-tax gain of $ 779.0 million; and American railway industries for $ 1.8 billion, resulting in a pre-tax gain of $ 400.0 million.
In 2019 he sold Ferrous resources for an aggregate consideration of approximately $ 550.0 million, which resulted in a pre-tax gain of $ 252.0 million. In 2020, Icahn Enterprises acquired all of the outstanding common shares of Vivus inc. when he came out of bankruptcy.
Part of Icahn Enterprises LP’s goal is to have a portfolio that is sufficiently diversified to help it withstand cyclical and economic fluctuations and, hopefully, the events of the Black Swan. But nothing is foolproof.
As you can see in the following chart, IEP stock was hit during the coronavirus-fueled sell-off in March 2020. Icahn Enterprises stock has since erased all of those losses, with support level near the top. February 2020. As of this writing, the IEP stock has increased 30% year-on-year, 5% year-to-date, and 95% since the March 2020 low.
Graphic courtesy of StockCharts.com
Although it took some time for investors in IEP shares to recoup their losses, the outlook for Icahn Enterprises LP is bullish as the economy reopens after being shut down due to COVID-19. In the near term, Icahn Enterprises stock is expected to climb 17% to its late February high and climb about 23% to its all-time December 2013 high of $ 68.24.
Judging by the company’s financial performance, those previous highs are within reach. For the first quarter of 2021, Icahn reported revenue of $ 3.4 billion, compared to a loss of $ 60.0 million in the first quarter of 2020. (Source: “Icahn Enterprises LP Reports First Quarter 2021 Financial Results , Icahn Enterprises LP, May 7, 2021.)
The company’s first quarter 2021 net income was $ 162.0 million, or $ 0.65 per share. In the first quarter of 2020, Icahn Enterprises recorded a net loss of $ 1.4 billion, or $ 6.34 per custodian unit.
The company reported first quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $ 435.0 million, compared to an adjusted EBITDA loss of $ 1.3 million in the three-year period. month ended March 31, 2020.
For the quarter ended March 31, 2021, Adjusted EBITDA attributable to Icahn Enterprises LP was $ 342.0 million, compared to a loss of $ 1.4 billion for the quarter ended March 31, 2020.
The company is keen to reward investors with a high dividend yield. The board of directors of Icahn Enterprises declared a quarterly dividend of $ 2.00, representing a return of 14.4%. The rolling annual return is 14.5% and the five-year return is 12.0%.
This lowers the average dividend yield of the S&P 500 by 2%.
Is the dividend of the IEP share safe? Icahn Enterprises LP had in fact increased its annual dividend over the past several years. It paid $ 1.50 per quarter in 2017, raised it to $ 1.75 per quarter in 2018, and increased it to $ 2.00 in 2019. The company maintained its quarterly payment at 2.00 $ since then.
While dividend hogs certainly don’t like to see a dividend hold up, you can’t fault the company for preserving its capital in 2020, the year that was rocked by the worst economic crisis in about 100 years. years.
On the contrary, investors were probably very happy to receive $ 2.00 per share each quarter.
Will Icahn Enterprises share resume its dividend increases soon? Companies reward investors with growing dividends when they make a lot of money. And right now, with the economy reopening and inflation rising, there’s a good chance Icahn Enterprises LP’s portfolio of companies will start to rake in even more money.
And if history is any indicator, Icahn Enterprises will begin rewarding buy and hold investors over the next few quarters.
The Truth About Icahn Enterprises LP
As explained above, Icahn Enterprises LP is a diversified holding company that has rewarded investors with long-term capital appreciation and sparkling dividends.
While IEP stock was hit in the March 2020 stock market crash, it has since come back in force. And the outlook for this dividend stock is bullish as the economy reopens. Carl Icahn is also optimistic about his own business. In May, he bought 7.7 million shares of Icahn Enterprises for $ 443.4 million.