In August 2012, Altria's Board voted to increase the regular quarterly dividend by 7.3%, which was Altria's 46th dividend increase in the last 43 years. Altria expects to continue to return a large amount of cash to shareholders in the form of dividends by maintaining a dividend payout ratio target of approximately 80% of its adjusted diluted EPS. Future dividend payments remain subject to the discretion of the Board.
Cash Returns to Shareholders - Share Repurchase Program
During the fourth quarter of 2012, Altria repurchased 15.3 million shares of its common stock at an average price of $32.31 for a total cost of approximately $493 million. During the full year, Altria repurchased 34.9 million shares of its common stock at an average price of $32.00 for a total cost of approximately $1.1 billion.
Altria has approximately $57 million remaining in the current $1.5 billion program authorized by the Board, which it expects to complete by the end of the second quarter of 2013. The timing of share repurchases depends upon marketplace conditions and other factors and the program remains subject to the discretion of the Board.
Pension Plans Contribution
At the end of 2012, Altria's pension plans were 78% funded on a Projected Benefit Obligation (PBO) basis. In January 2013, Altria made a voluntary $350 million pre-tax contribution to its pension plans, increasing the plans' PBO funding level to approximately 82%.
PM USA Agreement to Resolve Certain MSA Payment Adjustment Disputes
As previously announced, Philip Morris USA Inc. (PM USA) and other cigarette manufacturers have reached an agreement with 17 states, the District of Columbia and Puerto Rico to resolve long-standing disputes related to the Non-Participating Manufacturer (NPM) adjustment provisions of the Master Settlement Agreement (MSA). The agreement includes a release to the signatory states of their portion of more than $4 billion from the MSA disputed payment account. In return, the manufacturers will receive reductions in future MSA payments. Based on the current signatory states and an estimate of the 2012 NPM adjustment, PM USA estimates its reductions to be approximately $450 million, all of which PM USA expects to receive as a credit against its April 2013 MSA payment. This estimate is subject to change depending on various factors related to the calculation of the credit.