The return of funds was welcomed by the market which pushed Reckitt's shares 13p higher to 726p as analysts anticipated enhanced earnings per share. Shareholders will receive 35.65p per share in return for the consolidation of every 20 shares they currently own into 19 new shares.
The proposals are unaffected by the Chancellor, Ken Clarke's, recent clampdown on special dividends and buy-backs because the payout is to be made in the form of a foreign income dividend (FID) which is paid gross and does not attract advanced corporation tax. Because Reckitt earns more than 90 per cent of its profits overseas it also plans to pay part of future ordinary dividends in the form of Fids.The payback reflects strong cash flow.
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