Friday, February 17, 2012

Gross Cigarette Warnings Delay May Help Tobacco Stocks

Remember those gross anti-smoking warnings that were supposed to appear on cigarette packages? Well the tobacco companies have won a temporary delay from a U.S. District Judge giving the court more time to review the FDA mandate.

Obviously, many investors wouldn't touch these stocks with a twenty foot cigarette holder. Other investors, who don't have concerns, like the 'bad company discount' which tends to give tobacco stocks a higher yield than stocks of other industries. There are ten publicly traded cigarette and tobacco companies, almost all of which pay dividends, that have been turned up by Yields are as high as 8.9%.

One example is Altria Group Inc. (MO), which is a Virginia based company that makes and markets cigarettes, cigars, and beer. It is the largest cigarette company by market cap in the US. The stock has a forward PE of 12.6, and pays a very generous yield of 5.6%. The company's brands include Marlboro, Virginia Slims, Parliament, Benson & Hedges, Basic, L&M, Copenhagen, Skoal, Red Seal, and Husky.

Lorillard, Inc. (LO) has a dividend payout rate of 5.0%. The stock, which markets the Newport, Kent, True, Maverick, Old Gold, and Max brands, trades at 12.9 times forward earnings. The company just boosted its dividend payout rate by an incredible 19%.

Reynolds American Inc. (RAI) makes and markets cigarettes and other tobacco products including the Camel, Kool, Pall Mall, Doral, Winston, Salem, Misty, Capri, Dunhill, and Natural American Spirit brands. The stock has a forward PE ratio of 12.8, and pays a nice yield of 5.5%.

For a free list of all the high yield tobacco stocks, which can be downloaded, sorted, and updated, go to Also, if you haven't seen the Graphic Color Anti Smoking Pictures to Appear on Cigarette Packs, you should check them out.

Disclosure: Author did not own any of the above at the time the article was written.


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