Neenah Paper, Inc. NP, a global manufacturer of technical products and fine papers, recently announced a 10.0% year-over-year hike in its quarterly dividend payout to 33 cents per share or $1.32 on an annualized basis. The increased dividend will be payable from first-quarter 2016.
Based on the closing price of $66.47 on Nov 30, 2015, the proposed dividend affirms a yield of 2.0%. 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 strengths.
This is the sixth consecutive double-digit dividend increase for Neenah since December 2012. Since its inception in 2004, Neenah has paid uninterrupted dividend in every quarter. In addition, the company has hiked its dividend at a CAGR of 25% during the last five years.
The current 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 $25 million worth of stock through May 2016. Over the years, Neenah has consistently returned significant cash to its shareholders through dividends and share repurchases. The company’s investment strategy takes a holistic view of the rapidly evolving market and deploys a dynamic capital allocation approach to focus on the relative value of the various sectors within the broader industry. We remain encouraged by such focused attempts of the company to maintain a steady growth curve.
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 Sappi Limited SPPJY, Stora Enso Oyj SEOAY and Svenska Cellulosa Aktiebolaget SCA (publ) SVCBY, each carrying a Zacks Rank #2 (Buy).
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