Up in smoke: Imperial Brands to put breaks on dividend
British tobacco giant Imperial Brands is set to abandon its ten per cent dividend growth target as it focuses on catching the vaping market.
The news came alongside a £200m share buyback, sending the company soaring on the London exchange.
Read more: Puffed – Imperial Brands shares drop on vaping slowdown
Shares rose 2.74 per cent to 2,014.5p by the early afternoon, posting the biggest gains on the FTSE 100.
The company said it will continue to boost dividends, but at a different rate than its previous ten per cent per year target.
“Imperial Brands’ shares are popular among retail investors for their generous pay-out,” said AJ Bell investment director Russ Mould.
“However, there had been growing concerns in the market that its rate of dividend growth was unsustainable if the company were to keep the rate of net debt to earnings at comfortable levels.”
The company joins the likes of Vodafone and Marks and Spencer who both slashed their dividends in the last year. British Gas owner Centrica is widely expected to follow suit.
Read more: Vaping and e-cigs are safer than smoking cigarettes, so let your colleagues puff away at their desk
It follows months of declining share prices for Imperial, down over 15 per cent since the beginning of the year.
The firm is now hoping to keep up with changing customer behaviour with a bid for the e-cigarette market. Imperial, which already own Blu, said it will make more acquisitions in its next generation products portfolio.
Main image credit: Getty