Reynolds American Raises Dividend by 8.2%

Good news for shareholders of Reynolds American (RAI). The company just raised its quarterly dividend from 49 cents per share to 53 cents per share. That’s an 8.2% increase.

In December, the company said it was raising its dividend payout ratio to 75% to 80% of earnings. The stock rallied on that news which I found strange. I calculated that that would come out to a dividend of 52 cents per share, but I didn’t think that was coming for another year.

In October, when Reynolds announced the recent stock split, the company also increased its dividend from 45 cents per share to 49 cents per share. RAI has really raised its dividend by 17.8% in just a few months.

In the most recent CWS Market Review, I said I wasn’t concerned that RAI missed its earnings by a penny:

Reynolds American said it sees full-year 2011 earnings-per-share coming in between $2.60 and $2.70. The growth rate implied is modest, between 4% and 8%, but it’s nothing to sneeze at. Looking at the valuation, RAI is going for around 12 times this year’s guidance, and don’t forget Reynolds’ hefty dividend which currently yields 6.1%. That’s around 240 basis points more than the 10-year Treasury.

Now it’s yielding 6.3%. Reynolds American continues to be an outstanding buy.

Posted by on February 16th, 2011 at 1:00 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.