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Can This "Icahnic" Name Maintain Its Massive 21% Yield?

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Can This "Icahnic" Name Maintain Its Massive 21% Yield?

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

Last week, we did a poll to see which stock Wealthy Retirement readers wanted me to review for dividend safety. The overwhelming winner was Icahn Enterprises (NYSE: IEP).

That's probably not too surprising given its 21% yield and the fact that it's controlled by legendary chairman Carl Icahn.

Icahn Enterprises is a holding company that owns a variety of businesses in the energy, real estate, and pharmaceuticals industries, among several others.

The company currently pays a $0.50 per share quarterly dividend. With the stock a little above $9, that comes out to a gigantic 21% yield.

How likely is the company to maintain such a high yield?

Icahn Enterprises generated $156 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2024. EBITDA is a surrogate for cash flow. I typically look at other metrics, such as free cash flow, funds from operations, distributable cash flow, etc., depending on the company - but Icahn Enterprises reports its results using EBITDA, so that's what we'll go off of.

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This year, EBITDA is expected to nearly double to $293 million. However, both 2024's and 2025's forecasts are down from three years prior. The Safety Net model penalizes companies for negative three-year cash flow growth.

Another problem is how much the company is paying out in dividends compared with EBITDA. In 2024, while bringing in $156 million in EBITDA, it paid $391 million in dividends. This year, dividends paid are forecast to rise to $475 million.

Icahn's total dividend payout last year was 251% of its EBITDA. In 2025, that figure is projected to be 162%.

In other words, the company doesn't make enough money to pay its dividend.

Chart: Icahn Enterprises (NYSE: IEP)
View larger image
 

That doesn't bode well for Icahn Enterprises' dividend... but it doesn't tell the full story either.

Let's see if there's anything that can salvage its massive 21% yield.

Find Out IEP's Grade Here
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