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How Does Reynolds American Stock Look Compared to Peers?

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Mar. 5 2016, Updated 12:04 a.m. ET

Reynolds stock performance after 4Q15 results

Reynolds American’s (RAI) stock price rose 2.2% to $48.50 on February 11, 2016, after results were announced. Reynolds American’s stock has consistently seen upward movement since the beginning of 2015. However, the stock price fell 8.1% to $40.41 on August 24, 2015, from $43.98 on August 5, 2015. This was primarily due to the fall in global markets. However, Reynolds American has recovered since then and was trading at its peak of $49.95 on January 29, 2016.

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Stock prices

Reynolds American’s stock is up 49.8% since January 2, 2015. In comparison, the benchmark S&P 500 Index (SPY) (IVV) (VOO) is down 9.4%. The stock prices of Philip Morris (PM), Vector Group Limited (VGR), and British American Tobacco (BTI) have also risen 9.9%, 9.1%, and 2.6%, respectively, since January 2, 2015.

RAI’s stock gained momentum due to its recent announcement of an asset sale to Japan Tobacco (JAPAF) (JAPAY) for $5 billion on September 29. RAI is up ~10% since then. To learn more about the deal, please read Japan Tobacco Buys Natural American Spirit’s International Assets.

Dividend payment and debt repayment

During 4Q15, RAI’s board approved an increase of 16.7% in its quarterly cash dividend to $0.42 per share or an annualized $1.68. This is consistent with RAI’s 75% target payout ratio. The dividend will be payable on April 1 to shareholders of record on March 10.

The company’s trailing-12-month dividend yield came in at 2.9%. However, Altria Group (MO) and Philip Morris have higher dividend yields of 3.6% and 4.5%, respectively, compared to RAI. The company aims to repay debt and remains focused on deleveraging as quickly and efficiently as possible while continuing to return excellent value to shareholders.

RAI has 5.2%[1. Updated as on February 12, 2016] exposure in the PowerShares DWA Consumer Staples Momentum Portfolio ETF (PSL).

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