Reynolds American increases target on dividend payout to further enhance shareholder value

Reynolds American Inc. today raised its dividend payout target to 80 percent of net income, up from 75 percent.

It is the first overall increase in the payout target since R.J. Reynolds Tobacco Holdings Inc. completed its $4.4 billion purchase of Brown & Williamson Tobacco Co. in August 2004.

Analysts said that Reynolds’ action is likely an attempt to solidify current investors’ interest as cigarette shipment volumes continue to slowly decline. It also may serve to attract new investors during a time when a smaller number of publicly traded companies offer a sizable dividend.

The decision by the Reynolds board comes about six weeks after Reynolds announced a stock split and raised its post-split quarterly dividend from 45 cents to 49 cents, or $1.96 on an annual basis. That dividend is payable Jan. 3. to shareholders registered by Friday.

Thomas Wajnert, the chairman of the board of directors, said that Reynolds has paid $5.2 billion in dividends to shareholders since buying Brown and Williamson. It also has raised the quarterly dividend six times, more than doubling the post-stock-split value from 95 cents to $1.96 a share.

“In that time, the total return to our shareholders has been almost 150 percent, compared to about 22 percent for the S&P 500,” Wajnert said.

The increase in the target payout ratio “reflects the confidence both Reynolds American’s management and its board have in the business strategies that Reynolds American and its operating companies have in place,” said Susan Ivey, who has retired as Reynolds’ chairwoman and plans to retire on Feb. 28 as chief executive and president.

“Today’s decision further demonstrates how seriously we take our commitment to delivering an excellent return to our investors,” Ivey said.

Thomas Adams, the chief financial officer of Reynolds, said that the company will “continue to evaluate additional opportunities to enhance value for our investors.”

source: journalnow.com

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