Tobacco makers aren't fast growers, but they offer hefty
dividend payouts that income investors may find attractive.
The cigarette industry has faced a spate of problems over the
years in the U.S., from anti-smoking regulations to a decline in
usage. But with the advent of electronic cigarettes as well as
more overseas smokers, it has found new ways to keep moving
Consolidation may be the next big step. For months,
speculation has been running rampant about potential deals. In
fact, Wells Fargo said late last month after meeting
) management that it still thinks a potential merger between
Lorillard andReynolds American (
) is highly likely.
Lorillard, with a market cap of $21.7 billion, is the No. 3
U.S. player in the space. The Greensboro, N.C.-based company's
major brands include Kent, Maverick and Newport, the
second-best-selling brand in the U.S.
Lorillard, which has steadily increased its annual earnings
per share each year since 2009, has a three-year Earnings
Stability Factor of 1 on a scale of 0 (most stable) to 99 (most
erratic). Its current quarterly dividend of 61.5 cents a share,
or $2.46 annually, works out to a 4.1% yield. The S&P 500's
yield is 1.87%.
Reynolds is the No. 2 U.S. tobacco maker, with a $31.8 billion
market cap. Camel, Pall Mall and Winston are among its brands. It
also has a three-year Earnings Stability Factor of 1. Reynolds'
quarterly payout is 67 cents a share, or $2.68 for the year, for
a 4.4% yield. Its 85 Composite Rating is best in the eight-stock
That leavesAltria Group (
), with an $82.3 billion market cap, as the biggest player. The
maker of Marlboro and Virginia Slims boasts annual profit gains
since 2007, a 1 Earnings Stability Factor and an 84 Composite
The Richmond, Va.-based company's yield is the highest of the
three at 4.7%. It currently pays 48 cents a share on a quarterly
basis, or $1.92 for the year.