In early 2021, Safety Net rated Icahn Enterprises (Nasdaq: IEP) an “F” for dividend safety. In other words, a dividend cut was projected for the investment company run and majority owned by legendary investor Carl Icahn.
The issue was that Icahn Enterprises had not been profitable and Wall Street projected that 2021’s net income would be puny. The Safety Net model includes analyst estimates in its calculation.
But the analysts were way off. Instead of an $81 million profit that was the consensus estimate at the time, Icahn Enterprises earned a whopping $11 billion in 2021. This year, that number is forecast to rise to $14 billion before dipping back to $12.1 billion in 2023.
In 2022, Icahn Enterprises will likely pay out $2.7 billion in dividends, which is just 19% of its profits. Next year, that figure is forecast to rise to $3.05 billion, giving it a payout ratio of 25%. That is quite low and makes me comfortable that Icahn Enterprises can easily afford its dividend.
Strong Recent Dividend History
Icahn Enterprises has paid investors $2 per share every quarter since March 2019. It has also raised its dividend three times since 2013.
Prior to that, the company reduced the dividend in 2011, but that dividend cut has aged out and has been forgiven by the Safety Net algorithm. (The model accounts for dividend cuts only within the last 10 years.)
So for the past decade, the company has had a solid dividend-paying track record. Earnings should be very strong this year. And even if the analysts get it wrong by half next year, Icahn Enterprises should easily sustain its dividend.
Dividend Safety Rating: B
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I hope everyone has a great Christmas.
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