AKRON, Ohio, May 29, 2014 /PRNewswire/ -- The Goodyear Tire & Rubber Company (NASDAQ: GT) today announced an update to its 2014-2016 capital allocation plan focused on increasing shareholder returns and capturing high-return growth opportunities in North America and Latin America.
Due to Goodyear's strong 2013 free cash flow, which enabled the full funding of its hourly U.S. pension plans in early 2014, the company is reallocating approximately $1.1 billion of its 2014-2016 cash flow.
The updated capital allocation plan, which aims to increase shareholder value by providing approximately $650 million in returns to investors, strengthening the balance sheet and investing in high-return growth, includes:
- Allocating an additional $300 million to growth capital expenditures to enable the company to build a new plant to serve its North American and Latin American consumer tire businesses and capitalize on the anticipated growth in high-value-added tire markets in the two regions.
- Increasing the quarterly cash dividend on Goodyear's common stock by 20 percent to 6 cents per share from 5 cents per share beginning in September. The payout represents an annual rate of 22 cents per share for 2014 and 24 cents per share for 2015.
- Increasing the share repurchase program by $350 million to allow Goodyear to acquire up to $450 million of its stock through 2016.
- Based on company performance, the shareholder return program can be increased up to an additional $250 million, to a total of $900 million.
- Allocating an additional $400 million towards debt reduction, further strengthening Goodyear's leverage metrics and advancing the company's objective of achieving an investment grade credit rating.
"This updated capital allocation plan for 2014-2016 reflects Goodyear's commitment to balancing all our priorities – returning cash to shareholders, investing in high-return growth projects and achieving investment grade metrics – to drive long-term shareholder value consistent with our articulated strategy," said Richard J. Kramer, chairman and chief executive officer.The new tire plant will support Goodyear's long-term growth in high-value-added consumer replacement and original equipment market segments. "Our investment supports another key element of our strategy – to focus on winning with consumers in profitable market segments," Kramer said.