Imperial Brands lifts dividend by 10%

Neil Woodford Imperial Brands

Imperial Brands (LON: IMB) (IMB.L) released final results for the year ended 30 September this morning.

Entitled ‘AN IMPORTANT YEAR OF PROGRESS,’ the tobacco giant revealed that it is making solid progress on its strategy of strengthening its brand portfolio, and that it had seen strong results from its growth brands.

While total tobacco volume fell 4.1% for the year, growth brands volume increased 5.5%. Adjusted earnings per share rose 7% to 267p, although in constant currency terms, earnings fell 2.2%. Chief Executive Alison Cooper commented:

We are well placed to continue to enhance shareholder value by building on the momentum in our tobacco business and realising opportunities in next generation products.”

10% dividend increase

Importantly for dividend investors, the company delivered on its promise to lift its dividend by 10% per year in the medium term. The dividend was increased by 10% to 170.7p per share. At the current share price of 3,100p, that’s a yield of 5.5%.

Today’s 10% dividend hike is the 9th consecutive 10% dividend hike from the company. That really is an impressive achievement. The company reaffirmed its policy of “growing dividends by at least 10 percent per year over the medium term.”

A dividend payout ratio of 64% for the year just passed suggests that the group can comfortably afford to pay the current level of dividend.

Low valuation

On the earnings per share figure of 267p, Imperial currently trades on a trailing P/E ratio of 11.6. That represents good value for long-term investors, in my opinion.

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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