Imperial Brands dividend offers comfort to investors ahead of half-year results
The UK-based tobacco company is one of the few FTSE 100 stocks to maintain its dividend amid the Covid-19 crisis, with investors likely comforted by the pay-out ahead of its half-year results.
Imperial Brands is one of the few FTSE 100 stocks to keep its dividend amid the coronavirus crisis, with investors likely comforted by the pay-out ahead of its half-year results on Tuesday.
The tobacco company has had a challenging six months of trading, with the business having to scrap its target of 10% dividend growth and forced to shake up its management, replacing its CEO and chairman after a profit warning in September last year.
Analysts expect Imperial Brands to reduce its dividend slightly to 202p per share in 2020, down from 206.6p last year, implying a dividend yield of a little over 12% - making it one of the highest pay-outs among FTSE 100 companies.
However, it is worth noting that the reduction in annual dividend could be viewed negatively by investors, considering that the company has increased its pay-out to shareholders every year since it was spun-out of the Hanson conglomerate in 1996.
Balance sheet bolstered by cigar business sale
Imperial Brands completed the sale of its worldwide premium cigar businesses for £1.1 billion in April, with the units sold to a consortium of buyers.
Investors are likely eager for an update on Imperial Brands debt after management said that its recent transaction will be used to strengthen its balance sheet.
‘This disposal reinforces our strategic ambition of becoming a leaner and more agile organisation and the proceeds will realise value for shareholders by reducing debt as part of our ongoing focus on active capital management,’ Imperial Brands joint interim CEOs Dominic Brisby and Joerg Biebernick said in a statement.
‘We believe we have found the right long-term owners for Premium Cigars; they are committed to investing in the business to maximise future growth opportunities and are well positioned to further develop operations internationally,’ the pair added.
Imperial Brands rival Philip Morris scraps full-year guidance
Big tobacco faces challenging market conditions, with Imperial Brands rival Philip Morris choosing to scrap its 2020 full-year guidance in April as a result of the Covid-19 outbreak.
Despite withdrawing its guidance, Philip Morris managed to give investors something to smile about, with the maker of Marlboro reporting strong profit and sales figures in its first quarter earnings.
However, Philip Morris did admit that the impact of the Covid-19 crisis is likely to be more pronounced and reflected in its performance in Q2.
‘We also have to assume that, in certain markets, unemployment and related reductions in disposable income will have a temporary impact on market dynamics or the ability of certain small retailers to operate,’ Philip Morris CEO Andre Calantzopoulos said.
Adjusted earnings per share (EPS) came to $1.21, beating analysts’ estimates of $1.13, while sales climbed 6% to $7.15 billion.
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There are three ways to ‘buy’ UK shares with IG: spread betting, trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).
Remember, spread bets and CFDs are derivatives, which come with higher risk and reward than investing.
Cost to get exposure to Lloyds stock
|Spread betting||CFD trading||Share dealing|
|Action||Buy £160 per point||Buy 16,000 share CFDs||Buy 16,000 shares|
|Capital required to open||£2000||£2000||£10,000|
Note: Amounts do not include overnight funding charges and taxes. Spread bets are not subject to tax. CFDs are free from stamp duty, but subject to capital gains tax. Share dealing is subject to both stamp duty and capital gains tax.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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