Goodyear Tire Climbs After Announcing Plans To Return $4B To Investors

Shares of Goodyear Tire (GT) rose this morning after the company announced plans to return up to $4B to shareholders. As part of that plan, the company, which develops, manufactures and distributes tires, increased its dividend by 43%.

DIVIDEND AND CAPITAL ALLOCATION PLANS: Goodyear Tire this morning said its board of directors has decided to raise the quarterly dividend to 10c per share, a 43% increase from the prior dividend. The new dividend, payable December 1 to investors of record on November 1, represents an annual rate of 40c per share. The dividend increase is part of Goodyear's capital allocation plan, which includes capital expenditures, debt repayment, restructuring and a shareholder return program of up to $4B, the company said. "Our capital allocation plan demonstrates Goodyear's commitment to creating value by maintaining financial flexibility to execute our strategic plan, continuing to strengthen our balance sheet and investing for future growth while also providing significant direct returns to shareholders," Goodyear Tire Chairman, Chief Executive Officer and President Richard Kramer said. Kramer also noted that the tire industry is "healthy, growing and offers attractive opportunities to grow profitably."

LONG-TERM FINANCIAL PERFORMANCE TARGETS: Ahead of an investor meeting, Goodyear also forecast annual operating income of $3B from its segments in 2020 and cumulative free cash flow of $4.3B-$4.9B from 2017 through 2020. 2016

FINANCIAL TARGETS: Goodyear also reaffirmed its 2016 financial targets this morning. In April, Goodyear backed its fiscal 2016 expectations, including core segment operating income growth of 10%-15%, adjusted debt to EBITDAP ratio of 2.0x-2.1x at year-end and positive free cash flow from operations.

ANALYST OPINION: CLSA Americas said the initial take "looks good" and that the company's $4B shareholder return plan is "more than we anticipated."

PRICE ACTION: Goodyear Tire shares are up nearly 5% to $32.31 in morning trading. Shares are up over 20% over the last three months.