The board of directors of Reynolds American Inc. (RAI, Financial) declared the dividend for the last quarter of 2016. The U.S. tobacco giant headquartered in Winston-Salem, North Carolina, will pay 46 cents per ordinary share to shareholders of record as of Dec. 12.
Reynolds American is one of the biggest producers and vendors of tobacco and cigarettes in the U.S., holding a portfolio of well-known brands such as Newport, Camel, Pall Mall and Kent.
Management says this dividend payment will be the 50th consecutive quarterly cash dividend since becoming public in July of 2004.
In the third quarter, Reynolds American generated adjusted EPS of 61 cents, a 10.9% increase on a year over year basis, and missed analysts’ expectations on EPS by three cents, generating a negative surprise of 4.70%.
Source: Yahoo Finance
Revenue decreased by 1.6% from the third quarter of 2015 to $3.21 billion for the most recent quarter. The company missed analysts’ expectations on revenue by $100 million.
In the third quarter, R.J. Reynolds Tobacco Company, a subsidiary of Reynolds American, reported sales accounted for approximately 83% of the company’s total sales and represented a 0.8% increase on a year over year basis. This sales increase was driven by a 0.9% increase in the quantity of cigarettes shipped in the U.S. and by a 0.4% increase in the retail market share of Newport, both on a year over year basis.
R.J. Reynolds’ cigarette brands as a percentage of total U.S. cigarette shipments to retail outlets was 32.3%, according to the third quarter report. This represents a 0.1% decline from the same quarter of the prior year.
The company said Newport’s cigarette market share continued to be favorably impacted by its strength in the menthol category and continued momentum in the non-menthol category.
Reynolds American is trading at $55.10, down six cents (or -0.11%) from the previous trading day. The 52-week range is between $43.38 and $56.65. The company pays a quarterly dividend of 46 cents and the dividend yield is 3.34%.
The company is less volatile than the stock market (beta = 0.38) and has a market capitalization of $78.56 billion. Reynolds American has 1.43 billion shares outstanding. Of those, 42.21% are held by insiders and 47.90% are held by institutions. The volume of shares that can be traded on the stock market is 823.06 million.
The stock is trading at 3.65 times its book value per share (mrq) and 16.01 times its Ebitda. At the moment, the trailing price-earnings ratio is 14.32.
The tobacco giant has $1.96 billion in cash on hand, or $1.37 per share, as of the third quarter.
The total debt amounted to $13.18 billion.
The analyst recommendation is 2.2. The recommendation rating ranges between 1 (strong buy) and 5 (sell). The average price target for Reynolds American is $54.91 and ranges between a low of $49 per share and a high of $62 per share.
Reynolds American can be assessed with a dividend discount model as explained in this article for Altria Group Inc. (MO, Financial).
In the third quarter, Joel Greenblatt (Trades, Portfolio) increased his position in Reynolds American by 456.90%, while Barrow, Hanley, Mewhinney & Strauss and Ken Fisher (Trades, Portfolio) decreased their positions by 17.56% and 1.66%.
Disclosure: I have no positions in any stock mentioned in this article.
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