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Imperial Tobacco (OTCQX:ITYBY) not only sports a 4.9% dividend yield but also an 8.9% free cash flow. These are the types of numbers that value managers love.

Imperial was founded in England in the early 1900s. Smaller tobacco brands banded together to ward off James Duke (for whom Duke University was named). The company's major brands such as Davidoff and Gauloises are better known in Europe. Americans who roll their own tobacco are familiar with the Drum brand and Cohiba cigars, of which Imperial holds an interest.

The company is no great growth machine. Its revenues were about as mathematically flat as a company could achieve--7.005 billion pounds last year and 7.007 billion this year. Click here to see its current full year release.

It is the nice free cash flow yield that investors should eye. 2.352 billion pounds in funds from operations minus 291 million pounds in capital expenditures for a free cash flow of 2.061 billion pounds. With a market cap of 23.09 billion pounds, this gives us a free cash flow yield of 8.9%.

So even if Imperial doesn't grow, it pockets 8.9% if nothing changes. So what can a company do with this cash? Increase its dividend which Imperial has done, buy back shares, acquire other companies, pay down debt, or just let the cash accumulate on its balance sheet. All of these things are good for share holders and Imperial has done each and every one.

Why is Imperial down? Worries about the European economy. Concerns of more smoking bans.

Let's look at other Tobacco companies. Altria (MO) had a free cash flow yield of 5.1% using 2012's free cash flow and its current stock price. Here is a comprehensive article from Seeking Alpha. Lorillard (LO) has as free cash flow yield of 5.7% and Reynolds (RAI) 5.3%.

If Imperial's stock price rose to a point where its free cash flow yield was 5.5%, its stock would climb to 38 pounds and rise almost 60%. Pretty optimistic but still, you can wait and pocket 5% a year in dividends until the stock reaches a more reasonable valuation.

Source: Imperial Tobacco: Free Cash Flow Leader In Tobacco Space