Goodyear Tire & Rubber Co. is boosting its quarterly dividend by 43 percent to 10 cents per share starting Dec. 1.
The dividend increase — to 40 cents per share annually — is part of the Akron tire maker’s wider, multibillion-dollar plan to return more money to shareholders, pay down debt, invest in the company and make other significant financial moves that it outlined in an investor conference Thursday in Boston.
Investors boosted shares of Goodyear by $1.58, or 5.1 percent, to $32.39 in trading Thursday. Shares are down 0.9 percent since Jan. 1 and are up 9.5 percent from a year ago.
The higher dividend is payable to shareholders of record as of Nov. 1. Goodyear said its long-term goal is to achieve a 2 percent yield on its stock.
“The tire industry is healthy, growing and offers attractive opportunities to grow profitably,” Richard Kramer, chairman, chief executive officer and president, said in a news release. “Our strategy is built to take advantage of key industry drivers including the transition to increasingly complex, large-rim diameter tires and the growing influence of empowered consumers in all aspects of the tire buying process.”
Goodyear also reaffirmed its 2016 financial targets.
The company said it expects to have $3 billion in segment operating income in 2020 and cumulative free cash flow of $4.3 billion to $4.9 billion from 2017 to 2020.
“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,” Kramer said.
The company said it expects strong consumer demand in “disproportionally profitable” larger size tires of 17 inches in diameter and up.
Goodyear said long-term trends show autonomous cars are coming, with fewer cars on the road but more miles driven. In addition, customers will shift preference away from individual ownership to fleets.
The company said its recently launched online tire purchase program is working in the United States.
In addition, Goodyear said it will invest about $125 million in its Lawton and Fayetteville plants in the United States to increase manufacturing capacity of larger diameter tires.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ.