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Lower yielding tobacco beat their higher yielding brethren. You only have to look at Philip Morris (PM) and Lorillard (LO). The two have been outperforming the rest of the tobacco stocks.

Despite Philip Morris and Lorillard being perennially lower yielding stocks, they have been outpacing British American Tobacco (BATS), Altria (MO), Reynolds American (RAI), and Vector Group (VGR). There is reason behind the madness: These two companies have growth, something lacking with other cigarette companies.

The key to their success: Philip Morris and Lorillard have lower payout ratios. That means the company sees an opportunity to use its capital to grow the business.

There is reason behind the madness: The Philip Morris and Lorillard have growth, something lacking with other cigarette companies. Both companies' revenues grew faster than the others last year.

Philip Morris and Lorillard bested the others over the last year. That's not all-- the two outperformed the others over the last 2 years, 6 months, YTD, 3 months, 2 months and 1 month. Now, that's what I call consistency.

Philip Morris and Lorillard are two examples of dividend paying stocks with low payout ratios and strong revenue growth. Stocks with those characteristics are likely to perform better. The two companies should continue to outperform the rest of the tobacco stocks.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.

Source: The Key To Philip Morris And Lorillard's Success