Shares in Imperial Brands (IMB) sparked up 2.5% to £20.10 after the tobacco company announced a new capital allocation and dividend policy.
As well as laying out how the firm intends to grow its business, the new policy reaffirmed the current-year target of 10% dividend growth and promised ‘progressive’ dividend increases from next year ‘taking into account underlying business performance’.
Based on the consensus dividend forecast for this year and the current share price, Imperial is yielding 10.5% which is already more than double the prospective yield on the FTSE 100 index of 4.5% according to the latest AJ Bell Youinvest Dividend Dashboard.
Historically a yield of 4.5% is towards the upper end of the market’s range. As Simon Gergel, Allianz Global Investors’ head of UK Equities, points out, on its current yield the FTSE 100 is the most attractive it has been since 2000 relative to other global stock markets.
READ MORE ABOUT IMPERIAL BRANDS HERE
Along with the new dividend growth policy today’s announcement pointed to 'continued investment in organic growth opportunities' in tobacco and Next Generation Products (NGP) as well as potential mergers and acquisitions to build scale in NGP.
Although tobacco volumes fell by nearly 7% in the first half of the year, Imperial’s NGP revenues grew by a staggering 245% thanks to sales of its myblu vaping brand.
That was enough to see first half group revenues and operating profits beat market forecasts and for the company to confirm its full year guidance.
However statements by the US Food & Drug Administration (FDA) regarding potential changes to tobacco and vaping regulations, and the decision by the city of San Francisco to ban the sale and distribution of vaping products altogether, have seen shares in Imperial and US peers such as Altria (formerly Philip Morris) lag the broader market by a wide margin this year.
