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Domtar Corporation (UFS - Snapshot Report) recently raised its quarterly dividend on its common stock and on the exchangeable shares of Domtar (Canada) Paper Inc. (UFX.TO), a subsidiary of Domtar, by a stupendous 22.0% to 55 cents per share. The dividend will be paid on Jul 15, 2013 to shareholders of record as of June 14. Based on the closing price of $67.48 as on May 2, the proposed payout affirms a dividend yield of 3.3%

Domtar had earlier increased its quarterly dividend by 28.6%, from 35 cents to 45 cents per share in Jun 2012. Prior to that, the company had raised its quarterly dividend payout in Jun 2011 from 25 cents to 35 cents per share. For full year 2012, the company used $61 million cash towards dividend payments.

In addition to steady quarterly dividends, Domtar returns significant cash to shareholders through its share repurchase program. On Dec 15, 2011, Domtar’s Board of Directors approved a share repurchase plan to buy shares up to $1 billion with no specified deadline. During 2012, the company repurchased around 2 million shares for a total cost of $157 million.

Domtar designs, manufactures and markets fiber-based products like communication papers, and packaging papers and adult incontinence products. Some of its recognized brands of uncoated fresh sheet paper in North America are Cougar, Lynx Opaque Ultra, Husky Opaque Offset and First Choice.

Domtar currently carries a Zacks Rank #3 (Hold). We believe that the announcement of a dividend increase will augur well for the company and help boost shareholders’ confidence.

Other companies in the industry that are worth mentioning are PH Glatfelter Co. (GLT - Snapshot Report), KapStone Paper and Packaging Corporation (KS - Snapshot Report) and Resolute Forest Products Inc. (RFP - Snapshot Report), each carrying a Zacks Rank #1 (Strong Buy).

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