Stocks to Buy #2: International Paper (IP)
Click to Enlarge International Paper (IP) doesn’t get as much attention as it used to, but the stock has trounced the S&P 500 in the past five years thank in part to industry consolidation and its own cost-cutting efforts. More recently, however, IP stock has lagged the market — creating an opportunity to play for a potential breakout.
IP has bumped against the $50 level several times in the past year, indicating the potential for outperformance if it can break through. International Paper isn’t exactly a social media stock, so it isn’t reasonable to expect major returns on a breakout. Instead, look at it as an opportunity for a few extra percentage points of return from a quality company. IP stock features high free cash flows, a 2.9% dividend yield and a forward P/E ratio of 10.7 — all of which form a strong foundation to move out to new highs in due time.
It should also be noted that $43 has been a source of support in the past year, so IP stock has the potential to underperform below this level if the broader market sells off in the months ahead. Set your stops accordingly.