Top 5 Tobacco Producers Paying Substantial Dividends

Includes: LO, MO, PM, RAI, VGR
by: Efsinvestment

Many prominent investors make safe and high returns in the tobacco business. We screened the highest dividend cigarette companies with safe returns, and a maximum P/E ratio of 30. All of the following companies offer a minimum dividend yield of 3%, and have a minimum market capitalization of $1 billion. Data is derived from finviz. While there are several U.S.-based cigarette companies listed in NYSE, only the following ones fit this criterion:

Lorillard, Inc. (NYSE:LO): The North Carolina-based LO manufactures and sells cigarettes in the U.S. through its subsidiaries. The market capitalization of LO is $14.22 billion, and P/E ratio is 14.59 while forward P/E ratio is 12.17. The company had an EPS growth of 10.8% over the last five years. With a net profit margin of 17.33%, Lorillard paid a dividend yield of 5.26% last year. Recent dividend payments of LO per share are as follows:

Feb 25, 2011


Nov 29, 2010


Aug 30, 2010


May 27, 2010


Altria Group, Inc. (NYSE:MO): Founded in 1919, Virginia-based Altria manufactures, and sells cigarettes as well as wine products. Their brands are particularly popular in Eastern European countries. MO has a market capitalization of $56.5 billion, and a P/E ratio of 14.44, while the forward P/E is 12.39. Altria Group is expected to have an EPS growth of 6.10% in the next five years. Net profit margin in 2010 was 23%, while the company offered a nice dividend yield of 5.63%. Following are the recent dividend payments of Altria:

Mar 11, 2011


Dec 23, 2010


Sep 13, 2010


Jun 11, 2010


Philip Morris International, Inc. (NYSE:PM): New York-based Company manufactures, and sells cigarettes and other tobacco products around world. The market cap of Philip Morris is $119.17 billion, and P/E ratio is 16.98. Forward P/E ratio is 13.53. The company had an EPS growth of 8.06% over the last five years. In 2010, PM’s net profit margin was 11.07% and dividend yield was 3.85%. Recent dividend history of PM is as follows:

Mar 22, 2011


Dec 21, 2010


Sep 22, 2010


Jun 22, 2010


Reynolds American, Inc. (NYSE:RAI): Offering products under brand names such as Winston, Captain Black, Dunhill Pall Mall, Camel, Salem, Kool, Doral, Capri and Misty, RAI engages in the manufacturing and selling of cigarette and other tobacco products. The market cap of RAI is $21.29 billion, and trailing P/E ratio is 16.1, while forward P/E ratio is 12.9. Reynolds American had an annual EPS growth of 6.37% during the last five years. RAI's shareholders enjoyed a dividend yield of 5.81%. Following is the recent dividend history of Reynolds American:

Mar 8, 2011


Dec 8, 2010


Nov 16, 2010

2: 1 Stock Split

Sep 8, 2010


Jun 8, 2010


Vector Group Ltd. (NYSE:VGR): Formerly known as Brooke Group Ltd., Vector Group manufactures and sells cigarettes in the U.S. with more than 160 variations in style, length and packaging under various brand names. VGR has a market cap of $1.32 billion, and a P/E ratio of 25.9. The company had an EPS growth of 17.32% over the last five years, whereas this year’s earnings increased by 117.24%. With a net profit margin of 5.1% and a dividend yield of 9.08%, VGR is a pretty nice stock for dividend lovers. Vector Group’s recent dividend payments per share are as follows:

Mar 16, 2011


Dec 16, 2010


Sep 14, 2010


Jun 16, 2010


Note that all of the companies listed above paid increasingly higher dividends. It is also of interest to see how their profitability is linked to healthcare sector. Both sectors showed no sign of setback in the financial crises. We will be working on a more technical article to look for the correlation between the stock prices of tobacco and healthcare companies.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500. Become a contributor »
Problem with this article? Please tell us. Disagree with this article? .