Tobacco Stocks Lead IBD's Dividend Screen


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Three tobacco companies top IBD's Dividend Leaders screen. That's no accident.

The three companies have solid dividend yields of more than 4% and steady financial performances. Moreover, all three are trading near new highs.

Altria Group ( MO ), best known for Marlboro cigarettes, pays a quarterly dividend of 48 cents a share. That translates to an annualized yield of 5.1%. Altria raised its dividend from 44 cents on Aug. 23, making the 47th increase in the past 44 years.

In Q3, the company beat earnings and sales expectations and raised its guidance. The stock is testing resistance around 37.

Reynolds American ( RAI ), the nation's No. 2 tobacco company, is paying 63 cents per quarter, for an annualized yield of nearly 5%.

Reynolds raised the dividend in May, lifting it by 4 cents. Just three years ago, the quarterly dividend was 45 cents a share.

The company's earnings growth has ranged from 6% to 14% the past six quarters, making it one of the most steady in IBD's database.

The stock broke out of a cup with handle last week. It remains near the 51.35 buy point.

Lorillard ( LO )'s quarterly payout is 55 cents a share, for an annualized yield over 4%. In February, the dividend went up from 51.7 cents. Four years earlier, it was 30.7 cents.

Lorillard, which also has one of the steadiest earnings histories, has shot up more than 12% from an Oct. 10 breakout past 45.70.

Tobacco firms have the advantage of making products that are habit-forming. That makes the stocks attractive for income investors. But the industry also faces heavy regulation, continued litigation over health risks and a publicity campaign against smoking.

The industry is trying to compensate by offering smokeless tobacco products such as electronic cigarettes. They look like regular cigarettes but don't produce smoke, ashes or smell, while creating a vapor containing nicotine.

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

This article appears in: Personal Finance , Investing Ideas
More Headlines for: LO , MO , RAI

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