Reynolds American Earns 72 Cents Per Share

Our tobacco stock, Reynolds American ($RAI), released strong fourth-quarter earnings today of 72 cents per share which was four cents better than Wall Street’s estimates. That’s a 12.5% increase over the fourth quarter of 2010. For the full year, Reynolds earned $2.81 per share. One year ago, Reynolds issued guidance for 2011 of $2.60 to $2.70 per share.

Reynolds also offered earnings guidance for this year of $2.91 to $3.01 per share. Now let’s focus on the most important part of owning Reynolds: the dividend. According to company policy, they aim to pay 75% to 80% of their earnings to shareholders as dividends. So if Reynolds were to pay 80% of $3 per share, that would be a quarterly dividend of 60 cents per share. The dividend is currently 56 cents per share (it was raised twice last year).

Here are some details from Market Watch:

R.J. Reynolds Tobacco, the company’s cigarette unit, saw its revenue slip 0.4% to $1.76 billion as domestic volume fell 7.2%. Accounting for the elimination of private-label brands, volume dropped 7.1%. Total market share, excluding private label brands, fell 1.1 percentage points to 27%. Meanwhile, growth brands–which include Camel and Pall Mall–gained 0.3 percentage points of market share to hold 16.5% of the market.

At American Snuff, the smokeless tobacco unit that makes Grizzly and Kodiak moist snuff, total volume increased 6.1%, though revenue declined 14%.

Larger rival Altria last month reported its fourth-quarter earnings slid 9% due to several charges, though the tobacco company’s revenue rose 3.4% on strong volume growth for smokeless products and a modest increase in volume for cigarettes.

Going by yesterday’s close, Reynolds yields 5.58%. That’s a good deal. Reynolds benefitted last year as investors rushed to buy high-yield stocks as bond yields evaporated. The stock probably won’t see a capital gains surge this year like it did in 2011.

Posted by on February 8th, 2012 at 10:40 am


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