With its 2016 financial results report last month, the board of directors of Reynolds American Inc. (NYSE:RAI) declared its dividend for the first quarter of 2017.
The U.S. tobacco giant headquartered in Winston-Salem, North Carolina, will pay 51 cents per ordinary share on April 3 to shareholders of record as of March 10.
The dividend represents a 10.9% increase from the previous quarterly dividend of 46 cents per share.
The increase in the quarterly dividend is backed by robust growth in 2016 earnings and sales. The growth was driven by higher tobacco prices and an increase in the sales volume of Newport, one of the company’s flagship products.
The sustainment of lower costs in 2016 compared to 2015 significantly contributed to the improvement in the company's bottom line and revenue.
Reynolds American's results for the fourth quarter and full-year 2016 can be read in a previous article.
For 2017, analysts forecast the company will generate EPS of $2.58 on average, an 11.7% increase from 2016 EPS, ranging between a low estimate of $2.5 per share and a high estimate of $2.98 per share.
Source: Yahoo Finance
Revenue for 2017 is forecasted to come in at $12.97 billion on average, a 3.8% increase from the same figure in 2016.
Source: Yahoo Finance
Average revenue ranges between a low estimate of $12.78 billion and a high estimate of $13.17 billion.
With approximately $2.051 billion in cash on hand and a total cash flow of approximately $1.3 billion from operations, the company will have plenty of liquidity to sustain the 10.9% dividend increase.
Reynolds American is currently trading at $61.20, down 10 cents or -0.16% from the previous trading day. The stock is trading with a price-earnings (P/E) ratio of 14.4 and a price-sales (P/S) ratio of 7.
As of today, the majority of analysts surveyed recommend holding shares of Reynolds American with a recommendation rating of 2.8.
The analysts’ average target price per share is $59.26, a 3.2% downside to the current share price.
The stock is uptrending and has gained 9% year to date. Over the last 12 months, the share price ranged between a low of $43.38 and a high of $61.96. The stock is trading close to its 52-week high. For this reason, it may currently look overvalued. A previous article, however, explains why investing in tobacco is still a wise decision.
Disclosure: I have no positions in Reynolds American Inc.
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