Imperial Tobacco - a consideration?

I recently read an article suggesting that Imperial Tobacco is a favourite in the dividend growth stocks field with an excellent company dividend policy seeing double digit dividend growth. So is it worth a shot?

Firstly lets have a look at the strength of the dividend policy by figuring out the seven year average dividend growth.


             Dividend    Dividend Growth
2006        62p              
2007       69.5p             12.1%
2008       66.2p             -4.75%
2009        73p              10.27%
2010       84.3p            15.48%
2011       95.1p            12.81%
2012      105.6p           11.04%

So the average dividend growth over the 6 years is a whopping 9.49%,  clearly a lot of importance is put on their dividend policy. Now the dividend cover, a dividend of 105.6p and earnings per share of 68.1p Which gives a dividend cover of 0.64. Seemingly quite substandard.

It is also important to note that back in 2008 there was a dip in the dividend which means the dividend policy isnt as robust as I would hope for, I think it may therefore be worthwhile to wait for their next results to see what they intend with regard the dividend policy.


This will clearly need further research as they paid dividends out of reserves last year which is never good. Research may show that there may have been special circumstances affecting the profit. Tobacco companies are said to be heading into stormy sea with the future of smoking being in question. There are diversifications available however with smoke free cigarettes and the potential of other markets not currently maximised. Further research required here.