Key Takeaways
- International Paper yields 5.3% and Best Buy 3.7%, but International Paper’s dividend took 1,305% of its free cash flow over the twelve months to Sept. 30, 2026, against 45% for Best Buy.
- International Paper’s CEO said the company has discussed setting its dividend at 40% to 50% of free cash flow once its EMEA business is separated.
- Best Buy’s dividend grew 10% a year from fiscal 2021 to fiscal 2026, but just 1% in fiscal 2026.
- Over the next 10 years, International Paper pays more only if it keeps its $1.85 dividend.
International Paper (IP) declared its quarterly dividend of $0.4625 a share on Oct. 12, matching the $1.85 a year it paid in fiscal 2025. Then on Nov. 11, CEO Andy Silvernail said at Baird’s Global Industrial Conference that the company has discussed setting its dividend at 40% to 50% of free cash flow once its EMEA packaging business is separated.
That’s a 5.3% yield with a lot riding on what happens next. Best Buy (BBY) yields less, at 3.7%, but its free cash flow covers its dividend with plenty to spare.
So if only one of them gets my dividend dollars for the next 10 years, which should it be?
| Metric | Best Buy (BBY) | International Paper (IP) |
|---|---|---|
| Dividend yield | 3.7% | 5.3% |
| Annual dividend | $3.84 | $1.85 |
| Dividend growth, 5 years | 10.1% a year (fiscal 2021-2026) | -2.0% a year (fiscal 2020-2025) |
| Cash dividend payout ratio (TTM) | 45% | 1,305% |
| Net debt/EBITDA | 0.5x | 2.2x |
| Interest coverage | 40.4x | 1.8x |
Source: TIKR and StockAnalysis, at today’s prices. TTM to Aug. 1, 2026 (Best Buy) and Sept. 30, 2026 (International Paper).
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Best Buy has plenty of cushion
In the second quarter of fiscal 2027 (the 13 weeks to Aug. 1, 2026), Best Buy’s comparable sales rose 4.1% and adjusted EPS rose 15% to $1.47. Management lifted its fiscal 2027 adjusted EPS guidance to $6.70-$6.90, from $6.30-$6.60.
Its dividend has room to spare. Over the twelve months to Aug. 1, 2026, Best Buy paid $803 million in dividends from $1.77 billion of free cash flow, a well-covered 45% cash dividend payout ratio. The chart shows free cash flow dipping below the dividend in fiscal 2024, then covering it again in fiscal 2025 and 2026:
The catch is growth. Dividends per share rose 10.1% a year from $2.35 in fiscal 2021 to $3.80 in fiscal 2026, but just 1.1% in fiscal 2026. At a 45% payout, Best Buy can afford bigger raises than 1%.
International Paper’s check isn’t covered
Where Best Buy has cushion, International Paper has none. Over the twelve months to Sept. 30, 2026, it paid $979 million in dividends on $75 million of free cash flow, a 1,305% cash dividend payout ratio.
It wasn’t always this way. Free cash flow covered the dividend comfortably through fiscal 2022, ran thin in 2023 and 2024, and turned negative in fiscal 2025. Dividends paid jumped from $643 million in fiscal 2024 to $977 million that same year:
The North American packaging business is recovering. Segment operating profit rose to $427 million in the third quarter of 2026, from $204 million in the second, on higher prices, better mill performance and a full quarter of the NORPAC mill. But International Paper lost $1.10 billion from continuing operations in the quarter, after a $1.38 billion goodwill impairment on its EMEA business. And Silvernail called 2027 a “slog.”
So which dividend wins?
Best Buy gets my dividend dollars for the next 10 years.
At the five-year rates, Best Buy wins easily: $10,000 invested in it pays about $5,922 over the decade at 10.1% a year, against about $4,841 from International Paper at -2.0% a year. But neither rate describes these dividends today. At last year’s pace, 1.1% raises for Best Buy and a flat dividend at International Paper, International Paper pays about $5,300 over 10 years and Best Buy about $3,882.
That $1,418 edge assumes International Paper keeps paying $1.85 a share for a decade. Its free cash flow has hovered near zero or below it, quarter by quarter:
Free cash flow was negative in two of the last three quarters, and the company guides to $100 million to $200 million for all of 2026. My read: unless free cash flow climbs sharply after the spin, a dividend set at 40% to 50% of it would pay far less than today’s $1.85.
International Paper still has a real case. Its 5.3% yield pays a lot more today. “Our confidence in future profitable growth is grounded in what we have accomplished and the actions already underway, not an assumption that the environment will get easier,” Silvernail said on the third-quarter call. Over a decade, though, I’d rather own the check the business can actually afford.
Of course, if price increases and cost cuts lift International Paper’s free cash flow enough after the separation, a 40% to 50% payout could still support a sizable dividend.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
