On March 18, New York Mayor Michael Bloomberg asked his city council to outlaw the public display of cigarettes for sale. If the Democrat-dominated council complies, it will soon become illegal in New York City for vendors of smokes to show customers their wares. They’ll have to be hidden from plain view — stored in cabinets or under counters, for example. Yet it appears that dividend investors invested in smoking stocks don’t see a problem with that.
Already, Bloomberg has pushed through laws raising taxes on tobacco and banning smoking in restaurants and bars, and even in outdoor parks. As for this latest initiative, when asked about Bloomberg’s move last month, City Council Speaker Christine Quinn pronounced herself “very, very open” to the idea.
So why aren’t tobacco stocks suffering?
Dividend investors still hot on smokes
Since news of Mayor Bloomberg’s proposal broke, shares of tobacco industry bellwether Altria Group Inc (NYSE:MO) are up nearly 5% in value. Lorillard Inc. (NYSE:LO) and Reynolds American, Inc. (NYSE:RAI) are up 4.2% each, and even British American Tobacco PLC (ADR) (NYSEMKT:BTI) has notched a respectable 3.4% gain.
There are probably two reasons for this — maybe two and a half.
Hey, New York: Get over yourself
First and foremost, it’s not as if the New York market is the be-all and end-all for these companies. “Gotham” it might be, but America’s most populous city is still just one city, and most of these companies sell across the country and around the globe. So any decrease in tobacco sales caused by a new point-of-sale display ban will only dent the companies’ revenue streams — not dry them up entirely. What’s more, even in NYC, cigarettes will still be available for sale. They just won’t be visible.