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Vector Group: Upside In 2021 With Compelling 5.7% Dividend Yield

Mar. 04, 2021 3:22 PM ETVector Group Ltd. (VGR) Stock10 Comments


  • Vector Group reported Q4 earnings highlighted by a recovery from the weaker first half of 2020 along with strong profitability.
  • Stock yields 5.7% supported by steady underlying cash flows from its tobacco business and overall solid fundamentals.
  • We expect the company's real estate segment with exposure to New York City to strengthen as the pandemic ends, representing a bullish catalyst for the stock.
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Vector Group Ltd. (NYSE:VGR) is a holding company with two distinctive operating arms in its 'Liggett Group' tobacco business along with the 'Douglas Elliman' real estate brokerage. In some ways, this quirky diversification has its benefits as cigarettes are recognized as highly profitable with steady cash flows while real estate offers ongoing growth opportunities. Indeed, even as the company's real estate portfolio with exposure to New York City was pressured by the pandemic, Vector group was able to remain profitable in 2020 and is now benefiting from an improving outlook. We are bullish on the stock particularly as it relates to a recovery in its real estate business this year and see attractive value at the current level. Notably, VGR yields 5.7% which we believe is well supported by underlying fundamentals.

(Seeking Alpha)

VGR Earnings Recap

Vector Group reported its Q4 earnings on February 25th with GAAP EPS of $0.21, beating expectations by $0.05. Similarly, revenue in the quarter at $555 million climbed 26.2% year over year and was $105 million above consensus estimates. Net income in the quarter at $32.3 million more than tripled from $10.7 million in the period last year.

Overall, this was a solid quarter for the company, particularly as the real estate business presented a turnaround compared to weaker results in the first half of the year. For the full-year 2020, revenues reached $2.0 billion, up a more modest 5.2% over 2019. The operating income for 2020 at $245 million also climbed 6.0% over last year supported by cost-cutting measures implemented in response to the pandemic.

(selected financials. source: company IR/ annotation by BOOX Research)

By segment, the tobacco business has been a strongpoint highlighting by the 36.9% gross margin, up from 30.8% in Q4 2019. Part of this trend is based on an industry-wide pricing increase Liggett was able

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This article was written by

Dan Victor, CFA profile picture

Dan Victor, CFA is a market professional with more than 15 years of investment management experience across major financial institutions in research, strategy, and trading roles.

Dan leads the investing group Conviction Dossier, where his focus is on helping investors stay ahead of market trends and inflection points. Dan’s investing vehicles of choice are growth stocks, tactical exchange-traded funds, and option spreads. He shares model portfolios and research to help investors make better decisions, via his Investing Group’s active chat room.

Analyst’s Disclosure: I am/we are long VGR. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (10)

Retired Fernando profile picture
Author, good to see a positive article on Vector. Thank you. But, I think you missed the 5% stock dividend which was also stopped last year (In fact, that is why the dividend graph you show seems to grow every year, while it not. It was $0.4 x 4 every year.
VGR used to be a unbelievable company, extremely shareholder friendly. Now it is not as good, but still a good company to invest in.
Long VGR.
Dan Victor, CFA profile picture
@Retired Fernando they cut the dividend last year from $0.381 to the new amount of $0.20. this was mentioned in the article. $0.8 annualized represents a forward yield of ~5.75% right now.. stock is still down about 35% from highs above $21 per share back in 2018..
Retired Fernando profile picture
@BOOX Research with all due respect, you should do deeper homework before writing articles.
Vector didn't pay $0.381 last year, neither the year before or never for the past 20 years.
Before the 50% cut (from $0.4 to $0.2), Vector ALWAYS paid $0.4.
The amount you mention is the output from the dilution resulting by the 5% new shares: 0.4/(1+5%) = 0.3809
Same applies to the previous year, with a resulting figure of 0.3628 (0.3809/1.05).
And so on.
@Retired Fernando I sold mine after a Alpha Friend announced he dumped at 19.25...........he had it. I sold also just below that. I kept my proceeds in FIA cash until March 2020 when I bought CEQP at 4.1-4.6 and bought ton's of it. It was paying 58% annual. It's distribution held and made recent bold moves. I never liked that you had to wait a year to get a VGR report stating it's dividend was a return of capital partially. The IRS was constantly denying the claim, but eventually after sending the letter it would get fixed.........but it was always on a to do list.
LONG VGR but would wait for pull back here. It was a gift under $9
Jeff Swan profile picture
@cbinvest1000 Agree! I doubt we will ever see it under $9 again.
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