IMPERIAL TOBACCO DIVIDEND
Nobody expected that the Imperial Tobacco Company, despite its alert management, would be able to maintain its tax free dividend at the old 25 per cent. rate in present con- ditions. The general estimate was for a cut of 2+ per cent. and some of the pessimists were prepared for a reduction to 20 per cent.; hence the market's satisfaction with the actual distribution of 23 per cent. If one allows for the 7s. income-tax, against only 5s. 6d. for the preceding year, the 23 per cent. tax free payment really means a slightly higher gross dividend than the old 25 per cent. rate. With charac- teristic prudence the board is putting another £500,000 to general reserve, which is raised to £8,000,000, and the carry-forward at £1,613,000 is about £230,000 higher.
This indicates a reduction in earnings for the year ended October 31st, 1939, of roughly £460,000, or 4 p.c., a satis- factory result in view of difficult trading conditions and the heavier burden of taxation. What of the war-time outlook? I think it is reasonably good. Consumption, to judge from past experience, should hold up well, despite increased prices and restricted purchasing power, and I feel that this company, along with other British manufacturers, will be able to surmount the new Virginian-Turkish leaf problem on profitable lines. At just over £6 " Imps " Li ordinary units yield nearly 4 per cent. tax-free, equivalent to roughly 6 per cent. with tax at 7s. in the £. This seems to me a very conservative valuation of a first-class equity which should do well in war and peace.
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