Shares in Costain Group PLC (LSE:COST) jumped over 8% to above 180p for the first time in over five years after the construction group confirmed a new agreement with the pension trustee would allow it to significantly increase shareholder returns.
The infrastructure construction company will remove the dividend parity arrangement with the scheme trustee, eliminating a restriction that had previously required matched contributions.
Directors now plan to almost double the dividend payout for the coming financial year, subject to adopting a dividend cover policy of 3.0x adjusted earnings. The board also announced its intention to carry out a £20 million share buyback in 2026.
A statement from Costain also revealed that operating profits for last year were in line with expectations, as margins were above its 4.5% run-rate target, albeit revenues were around 7% behind forecasts.
Year-end net cash of £190 million was ahead of forecasts, aided by working capital timing.
The company said it continued to secure strong volumes of new work, such as the £1 billion contract at Sellafield and a five-year EDF extension worth £75 million.
Costain said it remains confident in further progress in 2026 and "a step change in performance" in 2027 and beyond.
Broker Peel Hunt called this pension news "significant" and analysts at Cavendish called it a "key milestone".