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Goodyear's shares jump after company raises dividend, reaffirms 2016 target

A mechanic stacks used tires outside the service bay of a Goodyear Tire & Rubber Co. auto garage in Shelbyville, Kentucky.
Luke Sharrett | Bloomberg | Getty Images
A mechanic stacks used tires outside the service bay of a Goodyear Tire & Rubber Co. auto garage in Shelbyville, Kentucky.

Shares of Goodyear Tire & Rubber gained more than 5 percent Thursday after the company increased its dividend and reaffirmed its fiscal 2016 financial targets ahead of its investors meeting.

Goodyear's Board said it will give a quarterly dividend of 10 cents a share of common stock, a 43 percent increase. The company said future dividends "will be subject to board approval."

The company also reaffirmed its financial targets, which include $3 billion in annual segment operating income in 2020 and cumulative free cash flow in the range of $4.3 billion to $4.9 billion from 2017 to 2020.

The news came after U.S. retail sales fell more than anticipated in August after weak purchases of automobiles and other goods.

"The tire industry is healthy, growing and offers attractive opportunities to grow profitably," Richard Kramer, CEO of Goodyear, said in a press release.

He added, "Our strategy is built to take advantage of key industry drivers including the transition to increasingly complex, large-rim diameter tires and the growing influence of empowered consumers in all aspects of the tire buying process."

Goodyear also updated its capital allocation plan to up to $4 billion. The company is expected to have an investors meeting Thursday.

Goodyear's stock closed higher at $32.39 a share. Even with its Thursday gains, the stock is still down 0.86 percent so far this year.

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— Reuters contributed to this report.