Goodyear Rises Most Since February After Boosting Dividendby
Growing demand for large tires increases profit opportunity
Company projects $4 billion in returns to shareholders
Goodyear Tire & Rubber Co. shares rose the most in seven months after the tiremaker raised its dividend 43 percent as part of a plan to return as much as $4 billion to shareholders.
The quarterly dividend will rise to 10 cents a share from 7 cents, starting with the Dec. 1 payout, the Akron, Ohio-based company said in a statement Thursday. Goodyear also forecast annual operating income of $3 billion from its three business units in 2020 and cumulative free cash flow of $4.3 billion to $4.9 billion from 2017 through 2020.
Goodyear rose 3.4 percent to $31.86 at 9:59 a.m. in New York after earlier gaining 5.9 percent, the most since Feb. 10. The shares had slid 5.7 percent this year through Wednesday.
Increasing popularity of sport utility vehicles that use tires with diameter of 17 inches or more has boosted the business, Chief Executive Officer Richard Kramer said in a presentation. That size threshold is pivotal, according to internal estimates the company posted on its website: While smaller tires generate $9 of profit on average across the industry, Goodyear said companies earn $25 on average for the larger ones.
And global demand for those larger tires is doubling from 222 million in 2015 to 444 million in 2020, according to estimates by LMC. So the global profit pool is increasing by $9 billion, almost three-quarters of which comes from the 17-inch and up segment, Goodyear said.
“The tire industry is healthy, growing and offers attractive opportunities to grow profitably,” Kramer said in a statement.