Neenah Paper, Inc. (NP), a global manufacturer of technical products and fine papers, recently announced a 12.5% year-over-year hike in its quarterly dividend payout to 27 cents per share or $1.08 on an annualized basis. The increased dividend will be payable from third-quarter 2014 and is scheduled to be paid on Sep 3 to shareholders of record as of Aug 16.
Based on the closing price of $49.86 on Aug 1, 2014, the proposed dividend affirms a yield of 2.2%. A steady dividend payout is part of the long-term strategy of Neenah to provide attractive risk-adjusted returns to its stockholders. In addition, healthy dividend increases at periodic intervals have been one of Neenah’s strong points.
This is the fourth dividend increase for Neenah since Dec 2012. The company had earlier raised the quarterly dividend payout by 25% year over year from 12 cents to 15 cents per share or from 48 cents to 60 cents on an annualized basis in Feb 2013. Neenah then increased its dividend from 15 cents per share to 20 cents or from 60 cents to 80 cents per share on an annualized basis in Aug 2013. Following this, the company again raised its dividend by 4 cents to 24 cents per share in Feb 2014.
The dividend hike signifies the inherent financial strength of the company and strong cash flows, generated from continued focus on high-margin businesses and a healthy execution of operating plans. Moving forward, Neenah expects to increase its dividend yield in the next couple of years to around 3%.
The company also has a share repurchase program in place, under which it can repurchase up to $30 million worth of stock on or before Dec 2014. Over the years, Neenah has consistently returned significant cash to its shareholders through dividends and share repurchases.
Based in Alpharetta, GA, Neenah offers premium image and performance-based products such as filtration, specialized substrates used for tapes, labels and other products, and high-end printing papers.
Neenah presently has a Zacks Rank #3 (Hold). Other players in the industry worth mentioning include Mercer International Inc. (MERC), Boise Cascade Co. (BCC) and Graphic Packaging Holding Co. (GPK), each carrying a Zacks Rank #2 (Buy).
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