RBC upgrades Imperial Brands on attractive dividend yield

The Canadian bank said Imperial’s expected full-year 2017 dividend yield of 4.9% is the highest in its coverage and particularly attractive in the current low-yield environment.

RBC pointed out that since 2008 Imperial has delivered a dividend compound annual growth rate of 12%, consistently increasing its dividend per share by over 10% each year.

“We believe Imperial has become a stronger and more reliable business and expect increased exposure to the US, improved cash generation and deleveraging to underpin its investment grade credit rating as well as the current dividend policy.”

RBC said the US market represents an attractive opportunity given its size, high affordability and solid price dynamics.

That said, the bank noted it was still early days and it will look for more supporting evidence that the Winston and Kool brands acquired by Imperial are on a sustainable trajectory.

At 1100 BST, Imperial Brands shares were up 0.4% to 3,584.00p.