Sunday, April 22, 2012

Socially Irresponsible High Yield Stocks

Many investors and a few mutual funds will purposely avoid investing in certain companies that are in industries that are not considered socially responsible, such as Alcohol, Animal Testing, Weapons, Gambling, Tobacco, Oil, Coal, and Nuclear Energy. However, stocks in one of these industries, cigarettes and tobacco, the yields re quite high.

Cigarettes are still selling well, in spite of the cigarette pack warnings, in spite of the anti-smoking cigarette commercials, and in spite of the upcoming gross anti-smoking warnings that are expected to appear on cigarette packages.

I don't smoke and I don't ever remember investing in a tobacco company. But there are investors who are just primarily concerned about the financials of a company, as opposed to the company's products. There are actually ten publicly traded cigarette and tobacco companies, most of which pay decent dividends, that have been turned up by Yields range from 3.5% to 9.3%.

One example is Lorillard, Inc. (LO) has a dividend payout rate of 4.5%. The stock, which markets the Newport, Kent, True, Maverick, Old Gold, and Max brands, trades at 14 times forward earnings.

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 price to earning ratio of 13.5, and pays a very generous yield of 5.5%. The company's brands include Marlboro, Virginia Slims, Parliament, Benson & Hedges, Basic, L&M, Copenhagen, Skoal, Red Seal, and Husky.

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 13.1, and pays a nice yield of 5.4%.

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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