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On Friday, The Goodyear Tire & Rubber Company (GT - Analyst Report) announced its decision to reinstate its quarterly cash dividend, which was discontinued from Dec 2002. The company also announced a share repurchase program and affirmed its outlook for 2013.

Goodyear Tire declared a quarterly cash dividend of 5 cents per share, payable on Dec 1, 2013 to shareholders of record as of Nov 1, 2013. This implies an annual dividend yield of 0.9%, based on the closing share price of $22.21 as of Sep 20, 2013. However, the payment of future quarterly dividends is subject to approval from the board.

Meanwhile, the board of Goodyear Tire also authorized a share repurchase program worth $100 million. The buybacks are aimed at offsetting the increase in the outstanding share count due to new issues under equity compensation programs.

The new capital deployment plans of Goodyear Tire are aimed at boosting shareholder value. The plans show management’s confidence in the financial strength of the company.

In addition to these capital management plans, Goodyear Tire also affirmed its guidance for segment operating income for 2013 at $1.5 billion. The company hopes to achieve a 10–15% growth in segment operating income till 2016.

Goodyear Tire also aims at attaining positive cash inflow (excluding pension pre-funding) till 2016. The company witnessed cash outflow from operations of $462 million in the first half of 2013, higher than the outflow of $451 million in the first half of 2012.

While the weak operating cash flow of Goodyear Tire raises questions about the prudence of spending cash on dividend and share buybacks, management believes that the company will generate positive cash flows in future. This is believed to be the result of the newly negotiated contract with a union that will remove volatility related to pension payment.

The Goodyear Tire & Rubber Company is one of the largest tire manufacturing companies worldwide. The company sells its products under Goodyear, Kelly, Dunlop, Fulda, Debica, Sava, and various other “house” brand names as well as private-label brands.

Goodyear Tire currently carries a Zacks Rank #1 (Strong Buy). Other stocks that are also worth looking at in the same industry include Continental AG (CTTAY), American Axle & Manufacturing Holdings Inc. (AXL - Analyst Report) and Fuel Systems Solutions, Inc. (FSYS - Snapshot Report). Both American Axle and Fuel Systems carry a Zacks Rank #1 (Strong Buy), while Continental AG carries a Zacks Rank #2 (Buy).

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