Imperial Brands is a member of the European dividend aristocrats list and interesting for dividend investors given the dividend yield of around 7% and a dividend growth rate of +10% over the last 10 years. Imperial Brands (IMB) lost 13.95% in September, the stock plunged on profit warning as the U.S. vaping crisis deepens. (see European dividend aristocrats performance September ). Dividend Investors should be aware of recent developments and announcements.
European Dividend Aristocrat Imperial Brands
Some history of Imperial’s dividend history. Imperial Brands (IMB) has been a stable source of dividend income for investors. The company has increased its dividend by 10% or greater for 10 consecutive years in a row. The compound annual dividend growth rate over 15 years is 11.2%. The chart below displays the dividend history of Imperial Brands by fiscal year.
Shares in Imperial Brands dived to their lowest level in a decade end of September after the British tobacco group warned over an annual sales hit. Imperial Brands, the smallest of the major tobacco companies, has now lost more than half its market value from a mid-2016 peak (4130 GBX). The stock closed at 1,820.50 last Friday.
IMB, the maker of Blu e-cigarettes said profits per share will be flat this year compared with last year. It now expects revenue growth of just 2% for the fiscal year (ending September 30), well short of its previous guidance of up to 4%. The company warned of weaker revenue due to challenges in its next-generation products (NGP) market, especially in the U.S.
The NGP market, the smoking alternatives like vaping, is now at risk. “It calls Imperial Brands’ and the tobacco industry’s longer-term business model into question,” said James Edwardes Jones (RBC Analyst).
The chief executive of Imperial Brands has announced she will step down on October 3rd.
Imperial Brands Dividend growth at risk
In July, Imperial Brands already said it would end its 10% annual dividend growth target in its next financial year, which begins in October, and base its future payments on the performance of the business. Investors had hoped the NGP business would drive growth as traditional tobacco declines. This is now questionable and certainly not reaching the 35%-115% annual revenue growth the company was expecting.
IMB could be a less stable source of income for dividend growth investors in the future, the annual dividend growth will be less or even zero.