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. (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 | $1.30 |
Nov 29, 2010 | $1.125 |
Aug 30, 2010 | $1.125 |
May 27, 2010 | $1.00 |
Altria Group, Inc. (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 | $0.38 |
Dec 23, 2010 | $0.38 |
Sep 13, 2010 | $0.38 |
Jun 11, 2010 | $0.35 |
Philip Morris International, Inc. (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 | $0.64 |
Dec 21, 2010 | $0.64 |
Sep 22, 2010 | $0.64 |
Jun 22, 2010 | $0.58 |
Reynolds American, Inc. (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 | $0.53 |
Dec 8, 2010 | $0.49 |
Nov 16, 2010 | 2: 1 Stock Split |
Sep 8, 2010 | $0.45 |
Jun 8, 2010 | $0.45 |
Vector Group Ltd. (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 | $0.40 |
Dec 16, 2010 | $0.40 |
Sep 14, 2010 | $0.381 |
Jun 16, 2010 | $0.40 |
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.
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