Boston, MA 05/30/2014 (wallstreetpr) – On May 29, 2014, The Goodyear Tire & Rubber Company (NASDAQ:GT) stated an update to its 2014-2016 capital allocation plan.
The plan
The plan is focused in improving shareholder returns, as well as capturing increased-return growth opportunities in Latin America and North America.
Owing to the company’s solid 2013 free cash flow, it is reallocating almost $1.1 million of its 2014-16 cash flows. In fact, a strong free cash flow in 2013 enabled the entire-funding of Goodyear’s hourly U.S. pension plans earlier this year.
The plan intends to increase shareholder value
The updated capital allocation program deliberates to enhance shareholder value by offering nearly $650 million to investors in returns, thereby investing in high-return growth and firming its balance sheet.
The plan includes the following
The entire plan of capital allocation includes allocation of an extra $300 million to “growth capital expenditures” in order to facilitate The Goodyear Tire & Rubber Company (NASDAQ:GT) to construct a fresh plant to cater to its Latin American and North American consumer tire business. The allocation also intends to capitalize on the expected development in high-value-added tire markets in these two zones.
Increasing cash dividend
The plan also comprises escalating the quarterly cash-dividend payable to The Goodyear Tire & Rubber Company (NASDAQ:GT)’s shareholders. The cash-dividend has been proposed to increase by 20% beginning in September. Therefore, the dividend value increased from 5 cents per share to 6 cents per share on the company’s ordinary stocks. The payout reflects an annual rate of 22 cents on every share for this year and 24 cents on every share for the next year.
Increasing share repurchase program
Growing the share repurchase activity by $350 million in order to permit the company to purchase up to $540 million of its shares through 2016 is also a part of the capital allocation program. In addition, it comprises allocation of an additional $400 million meant for debt shrink, further reinforcing The Goodyear Tire & Rubber Company (NASDAQ:GT)’s leveraging metrics as well as improving its aim of attaining an investment grade credit rating.
