Which Of The 6 Cigarette Makers Is Most Attractive To Dividend Investors?

Includes: BTI, LO, MO, PM, RAI, VGR
by: Arie Goren

Cigarette makers are generally profitable and pay rich dividends. In this article, I tried to determine which of the six cigarettes manufacturers, traded in the U.S., is the most attractive for dividend-seeking investors.

I consider that besides dividend yield, the consistency and the rate of raising dividend payments are the most important factors for dividend-seeking investors. Of course, it is also essential that a company has enough earnings growth prospects to maintain increasing dividend payments.

The six stocks are: Philip Morris International, Inc. (NYSE:PM), British American Tobacco plc (NYSEMKT:BTI), Altria Group Inc. (NYSE:MO), Reynolds American Inc. (NYSE:RAI), Lorillard, Inc. (NYSE:LO) and Vector Group Ltd. (NYSE:VGR). All the data for this article were taken from Yahoo Finance and finviz.com on March 06, before the market open.

The table and the charts below present the six cigarette companies, their last price, the market cap, the forward annual dividend rate, the forward yield, the payout ratio and the annual average dividend rate of growth for the past five years.

The last chart emphasizes the consistency of raising dividend payments during the last five years. The chart clearly shows that the PM and LO have raised their payouts at a higher rate than the other cigarette makers in the last five years.

MO Dividend Chart

MO Dividend data by YCharts

BTI Dividend Chart

BTI Dividend data by YCharts

BTI pays dividends twice per year in March and in August.

Data: Yahoo Finance

PM Dividend Yield Chart

The charts below present the trailing P/E, the average annual earnings growth estimates for the next five years and the price-to-sales ratio for the six companies.

The charts above clearly show that the trailing P/E of VGR is very high, and among the six cigarette companies PM, BTI, LO and VGR have the best earnings growth.

The price-to-sales ratio of BTI is very high.


Among the six companies, the PM and LO have raised their payouts at a higher rate. Investing in companies that regularly raise dividends provides security in an uncertain market and means higher returns ahead. Companies that regularly increase dividends are generally more stable. Increasing dividends is the assurance that dividend income retains its purchasing power over time.

The table below shows the most important parameters, for dividend-seeking investors, for the two companies; Philip Morris International and Lorillard.

Although PM had a better annual average dividend growth rate and a lower payout, I think that Lorillard is a better choice for dividend-seeking investors due to its much higher yield.

Chart: finviz.com

Chart: finviz.com


In my opinion, Lorillard, Inc. is the best choice among the cigarette companies I reviewed for dividend-seeking investors, due to its high yield and its good earnings and dividend growth prospects.

PM Dividend Yield data by YCharts

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.