Turning Point Brands, Inc. (NYSE:TPB) will pay a dividend of $0.07 on the 5th of July. This means the annual payment will be 0.9% of the current stock price, which is lower than the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Turning Point Brands' stock price has increased by 39% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Turning Point Brands

Turning Point Brands' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, Turning Point Brands' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 11.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

Turning Point Brands Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the dividend has gone from $0.16 total annually to $0.28. This implies that the company grew its distributions at a yearly rate of about 9.8% over that duration. Turning Point Brands has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Turning Point Brands has impressed us by growing EPS at 10% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Turning Point Brands' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Turning Point Brands that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.