Tobacco stocks are typically high dividend payers and report consistent earnings trends. Currently, with investors shifting to more aggressive stances and bidding up shares of growth companies, high-yielding equities have been left behind. In fact, the majority of dividend stocks appear to be trading below their 50-day moving averages, lagging the moderate increase in the S&P 500 average over the second quarter.
Here are four of my favorites, starting with some key statistics:
|Symbol||Company Name||Current Dividend Yield %||Price-to-Earnings (TTM)||Dividends Per Share||Current Price||Earnings Per Share||2013-07-01 CAPS Rating|
|MO||Altria (NYSE:MO) Group||5.0||16.4||1.76||35.38||2.16||5|
|BTI||British American Tobacco (NYSEMKT:BTI)||5.5||29.4||5.75||105.01||3.57||4|
|RAI||Reynolds American (NYSE:RAI)||5.2||18.1||2.52||48.8||2.70||4|
A brief discussion of each might help decide on the best for your portfolio:
Philip Morris USA owner favorably priced
Shares of Altria Group Inc (NYSE:MO), the owner of Philip Morris USA, among several other subsidiaries earned $2.16 a share in the trailing 12 months. The stock is trading at just over 16x that figure. Last year, cigarette volumes were essentially flat, while smokeless tobacco and wine volumes each climbed nearly 4%. Share earnings are growing nicely, including a $0.10 year-over-year increase, to $0.69, in the March quarter. Catalysts were higher operating income across key segments, thanks largely to cost reductions, as well as increased equity income from its investment in SABMiller, and the absence of impairment and exit (cost containment) charges.
The company, receiving most of its earnings from Marlboros (smokeable products contributed 84% of 2012 revenue), distributes a dividend amounting to $1.76 a share, a 5.0% yield at the current price of just over $35. It is ranked 5 out of 5 by the CAPS Community (link).
The best yield among the four
British American Tobacco plc (LON:BATS) shares, trading on the New York Stock Exchange, as opposed to its London equivalent BATS.L, offers a sizable payout of $5.75 a share annually, about a 5.5% yield at its sunken price. The shares peaked at $115.21, before falling to the recent price of about $105.
This maker of Dunhill, Kent, Lucky Strike and other brands is a prime bounce-back candidate. Pricing power is helping to fuel revenue gains, while sales of smokeless products are also gaining ground. The low volatility shares (beta is 0.62) should be considered for their steady income. It is ranked 4 out of 5 by the CAPS Community.