Imperial Brands share price rallies on £200m buyback

Written by: Tsveta van Son
March 11, 2020

Imperial Brands’ (LON:IMB) share price has surged in London in today’s session as the tobacco market unveiled a £200-million buyback. The move comes after Liberum recently reaffirmed the tobacco marker as a ‘buy,’ arguing that the company could be one of the ‘most attractive’ consumer staples stocks if it can restore its credibility.

As of 10:41 BST, Imperial Brands’ share price had added 2.22 percent to 2,004.28p, outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.16 percent in the red at 7,541.27 points. The group’s shares have given up more than 30 percent of their value over the past year, as compared with about a one-percent dip in the Footsie.

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Imperial Brands unveils buyback

Imperial Brands updated investors on its capital allocation and shareholder distributions policy today, noting that its dividend policy will be progressive after the current financial year ending September 30, growing annually from the current level, taking into account underlying business performance. The cigarette maker further unveiled plans to return surplus cash, and announced a buyback of up to £200 million.

Analysts weigh in on move

“Imperial Brands’ large, stable and growing dividend has been the stock’s main attraction for decades. Recently though that hasn’t been enough to support the share price, which is down over 50% since 2016 despite dividends rising by 10% a year,” Nicholas Hyett, an equity analyst at Hargreaves Lansdown, commented, as quoted by Proactive Investors, adding that with the group’s “dividend yield now over 10%, management have clearly decided enough is enough, and while payments to shareholders will continue to grow going forwards, share buybacks and debt reduction have moved up the list of priorities”.

According to MarketBeat, the cigarette maker currently has a consensus ‘hold’ rating, while the average target for Imperial Brands’ share price stands at 2,909.55p.