Imperial Tobacco to pay out half of profits in dividends

Investors starved of income got some good news today, when Imperial Tobacco, one of Britain's biggest companies, committed itself to paying out half of all its profits in dividends.

Imperial said the move reflects its "strong financial position" and will be a fillip to pension funds fighting to close deficits.

Last year Imperial - the maker of Lambert & Butler, Drum, Rizla, Gitanes and John Player Special among other tobacco brands - paid out around £1.5 billion to shareholders.

That was 47% of profits, making it already one of Britain's biggest dividend payers.

The increase today will be welcomed, coming at a time when previously reliable providers of income on shares - banks and BP, notably - are struggling somewhat.

The top three shareholders in the cigarette giant are Invesco, Legal & General and Scottish Widows
Imperial's shares rose 84p to 1878p, valuing the business at £19 billion.

The company also said today that sales are strong. Revenues rose 5% in the first quarter.

Chief executive Alison Cooper said: "We continue to focus on stengthening our position in markets where challenges persist, particularly in Spain and Greece."

Investec Securities reckons shares, which have had a tough time lately, are a buy.

"We think this should put a stop to the recent rot in the share price and create a platform for a more balanced ticket of top-line delivery," it says in a note to clients.