Dividends to return as firms divvy up the spare cash

ONE MORE THING:THERE WAS good news for Smurfit Kappa shareholders on Wednesday with the packaging company reinstating a dividend for the first time since 2008.

This follows a near trebling of its pre-tax profit last year.

Smurfit is paying 15 cent a share for full year 2011 – a yield of more than 3 per cent.

This is significantly higher than the yields offered by food groups Kerry and Glanbia, which are both bucking the downturn.

Smurfit might not be the only Irish listed company to move on the dividend front this year, which would be welcome news to many Irish investors who have been whacked in the recession.

Irish Continental Group is expected to become debt-free in 2012. The ferry operator generates a lot of cash and has paid a special dividend of €1 a share to investors for the past few years.

Eamonn Rothwell, ICG’s chief executive and biggest shareholder, will have to decide what to do with its spare cash in the current low interest rate environment.

It could make an acquisition and rumours of a deal in the Isle of Mann have been doing the rounds.

Or it might spend some money on its fleet. A more likely scenario might be a return of some cash to shareholders.

CC is another cash-generative company that could boost its divvy to shareholders, as is CRH, in the absence of a knockout acquisition.

Davy analyst Barry Gallagher this week produced a lengthy note on the Clonmel-based cider and beer group and highlighted its healthy cash position.

According to Gallagher’s calculations, CC will have net cash of €150 million – roughly 15 per cent of its market cap – in 12 months’ time assuming there are no deals or returns to shareholders in the meantime.

“We view this as unlikely,” he said. “We see both value-creating acquisitions and increased cash return to shareholders as viable options and not mutually exclusive.”

Aer Lingus had €927 million in gross cash at the end of last September.

Ryanair, the former State airline’s biggest shareholder, has been calling for a dividend payout for the past year or so, with the Government also joining in the chorus of late.

This might yet turn out to be the year of the dividend.

Or should that be the return of the dividend?