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Shares of cigarette maker Reynolds American Inc. (RAI - Analyst Report) reached a new 52-week high of $48.18 on Monday, May 13, following the company’s announcement of hiking its quarterly cash dividend in the annual shareholders meeting.

The closing price of Reynolds American was $47.97 on May 13, representing a solid 1-year return of about 18.5% and a year-to-date return of about 11.9%. Average volume of shares traded over the last three months stands at approximately 2360.2K.

Growth Drivers

On May 9, 2013, Reynolds announced that it will hike its quarterly dividend by 6.8% to 59 cents payable on Jul 1, 2013 to shareholders of record at the close of business on Jun 10, 2013. The stock now has a dividend yield of 5.25%.

The owner of Pall Mall and Camel has increased its dividend ten-fold since it was listed in NASDAQ on Jul 30, 2004. The company regularly returns value to its shareholders in the form of dividends. This is the 36th consecutive quarterly cash dividend paid by Reynolds.

On Apr 23, Reynolds delivered a robust first-quarter earnings of 72 cents per share, surpassing the year-ago earnings by 14.3%. Earnings improved on the back of cost reduction efforts, positive pricing and expense management and were ahead of the Zacks Consensus Estimate by 4.3%.

Although the Tobacco segment suffered volume declines due to ongoing anti-tobacco campaigns and rising excise tax imposed by governments around the globe, the American Snuff segment reported modest gains on the back of rising market share of the Grizzly brand.

Further, the company has also advanced in the E-cigarette category and formed a new subsidiary called R.J.Reynolds Vapor Company, where it has re-engineered and developed its own patented vapor technology and is testing a new product called Vuse.

Moreover, Reynolds American spent $300 million to purchase 6.5 million shares under the company’s $2.5 billion share repurchase program in the quarter.

Reynolds currently carries a Zacks Rank #2 (Buy).

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