Imperial Brands offers a prospective dividend yield of 5.5% right now

2018/2019 Dividend forecast Unilever Diageo British American tobacco imperial brands

Sentiment towards Imperial Brands (LON: IMB) (IMB.L) is pretty low right now.

The shares have fallen from the 4,000p mark this time one year ago, to just 3,120p today, a decline of over 20%.

Has that fall created an opportunity for dividend investors? I believe it has.

Outstanding track record

Imperial Brands has an outstanding track record as a dividend payer. Over the last five years alone, the tobacco giant has increased its dividend payout from 95.1p per share to 155.2p per share, a compound annual growth rate (CAGR) of 10.3%.

The company has stated in the recent past that it is committed to dividend increases of around 10% in the “medium term.”

City analysts forecast dividend growth of 10.2% this year and 8.3% next year.

2017 dividend forecast

Imperial reports FY2017 preliminary results on the 7th November, so we will find out the size of the full-year dividend payout next week.

However, right now, the City forecasts a FY2017 dividend payout of 171.1p.

If the company can meet analysts’ expectations and deliver on that payout, investors are looking at a potential dividend yield of 5.5% at the current share price, which is no doubt an attractive yield. Expected earnings of 269p would provide dividend coverage of 1.6 times.

I already own Imperial Brands in my personal dividend portfolio, however with the stock trading on an estimated P/E ratio of just 11.6 and potentially yielding 5.5%, I am giving serious consideration to topping up my holding right now.

Disclosure: Edward Sheldon, CFA owns shares in Imperial Brands. 

This article is provided for general information only and is not intended to be investment advice. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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