Lorillard Generates Steady Profits, Hefty Dividends

By
A A A
Share |

Despite a seemingly uphill battle over the years for tobacco companies, they keep finding new ways to generate revenue.

That's good news for dividend investors, since tobacco firms pay some of the heftiest dividends.

Lorillard ( LO ), for instance, has a policy to return 70% to 75% of its net income to shareholders in the form of quarterly cash dividends. The Greensboro, N.C.-based company has paid out a dividend of 55 cents a share the past two quarters. That works out to an annual total of $2.20, or about a 4.4% yield vs. the S&P 500's 2.43%. Its payout is up 77% from early 2009.

The No. 3 U.S. maker of cigarettes under brands such as Newport, Kent and Maverick has posted annual profit gains between 7% and 18% the past four years. That steady growth helps it secure a three-year Earnings Stability Factor of 1 and a five-year factor of 2, on a 0 to 99 scale. That means its EPS growth is among the steadiest of all companies.

Analysts expect double-digit gains to continue at 12% this year and 13% the next.

In the third quarter, Lorillard stepped up earnings growth to 15% from Q2. Sales rose 10%, the best growth rate in nine quarters, boosted by higher average selling prices and higher unit sales volume.

The company's retail market share increased to 14.9%, driven by strength in its Newport Menthol brand.

Another avenue of growth Lorillard is pursuing is in the e-cigarette market. Blu eCigs, which it acquired in April 2012, reached about a 49% share of that market during the quarter. To further fuel growth, Lorillard in October bought Skycig, a U.K. e-cigarette business.

The stock sits 6% below its Nov. 20 peak and appears to have found support at its 10-week moving average. It's advanced 28% this year, in line with the broader market as tracked by the S&P 500.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: LO

Investor's Business Daily

Investor's Business Daily

More from Investor's Business Daily:

Related Videos

Stocks

Referenced

100%

Most Active by Volume

89,970,926
  • $16.15 ▲ 0.12%
77,131,582
  • $58.94 ▼ 1.31%
67,336,935
  • $26.56 ▲ 1.68%
48,814,124
  • $86.20 ▲ 0.02%
47,526,126
  • $23.21 ▲ 0.78%
44,660,424
  • $23.91 ▲ 6.36%
38,799,699
  • $4.289 ▲ 4.36%
36,199,890
  • $40.01 ▼ 0.97%
As of 4/17/2014, 04:07 PM