Imperial Brands’ update would give you the impression nothing bad is happening in the world. The cigarette and vaping company has so much spare cash sloshing around that it is going to return £2.3 billion to shareholders via dividends and share buybacks. That’s 13% of its market value, which is astonishing.
AJ Bell’s Russ Mould said: “Companies buy back shares when they think their stock is high, so Imperial Brands allocating £1 billion for its share buyback programme running to September 2023 gives you a clear indication of what it thinks about its current market value.
“It is gaining market share and is also bringing down the ratio of net debt to earnings despite still investing in the business to make it more competitive in the future.
“Investors look for so-called defensive companies which do well no matter the state of the economy, and Imperial Brands has become the poster child for this category.
“Smoking and vaping is addictive and unhealthy, so it is by no means a perfect company. Yet for investors without morals Imperial Brands has been a rare gem of a stock this year, with its share price up 20% year-to-date, significantly outperforming the FTSE 100 index which has fallen nearly 6%.”