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Domtar president and CEO John Williams.SHAUN BEST

Paper producer Domtar Corp. announced Wednesday that it is increasing its quarterly dividend by 29 per cent.

The move to up the payout to 45 cents (U.S.) from 35 cents per common share would raise the yield on the company's stock to about 2.1 per cent from 1.6 per cent based on Tuesday's closing stock price of $86.05 (Canadian) per share on the Toronto Stock Exchange.

Payment will be made July 16 to stockholders of record at the close of business June 15.

"The board's decision to increase the dividend reflects our continued confidence in our ability to generate strong cash flows," president and chief executive officer John D. Williams said in a release.

"Creating shareholder value and managing our capital effectively remains a priority and we intend to continue to assign the majority of our future free cash flow to our shareholders," Mr. Williams added.

Domtar manufactures and distributes a wide variety of fibre-based products including communication papers, specialty and packaging papers and adult incontinence products.

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