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Neenah Paper, Inc. (NP - Snapshot Report), a global manufacturer of technical products and fine papers, recently announced a 33.3% year-over-year hike in its dividend payout to 20 cents per share or 80 cents on an annualized basis. The increased dividend will be payable from third quarter 2013, and is scheduled to be paid on Sep 3 to shareholders of record as of Aug 16.

Based on the closing price of $31.10 on May 30, 2013, the proposed dividend affirms a yield of 2.6%. 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 second dividend increase for Neenah in 2013. 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. Prior to that, Neenah raised its quarterly dividend in Feb 2012 from 11 cents to 12 cents per share and in Feb 2011 from 10 cents to 11 cents.

The dividend hike signifies the inherent financial strength of the company and strong cash flows, generated from a 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 two to three years to around 3%-4%

The company also has a share repurchase program in place, under which it can repurchase $10 million worth of stock over the next 12-month period. 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 #4 (Sell). Other players in the industry worth mentioning include Potlatch Corporation (PCH - Snapshot Report) and Resolute Forest Products Inc. (RFP - Snapshot Report), both carrying Zacks Rank #1 (Strong Buy), and PH Glatfelter Co. (GLT - Snapshot Report), which carries a Zacks Rank #2 (Buy).

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