As a fellow Fool pointed out in an article earlier this year, Altria Group Inc (NYSE:MO) has a 28.7% stake in SABMiller that it acquired as a result of selling Miller. This stake is performing very well, and Altria Group Inc (NYSE:MO) generates significant earnings as a result of it. With beer not being part of its core tobacco business, I believe that this could easily be spun off to existing shareholders. If that were to occur, shareholders could potentially reap rich rewards such as when Altria Group Inc (NYSE:MO) spun off Kraft and Philip Morris International Inc. (NYSE:PM). Since both of those spinoffs, each company has gone on to provide significant shareholder returns.
Lorillard Inc. (NYSE:LO) has recently made efforts to diversify itself against total exposure to the menthol cigarette market. With potential bans on menthol being talked about, the company is smart to put itself in a position to be able to move on even if that were to occur. The company introduced a non-menthol brand of Newports last year and also acquired the electronic cigarette manufacturer Blu e-Cigs. This represents a significant growth opportunity for Lorillard Inc. (NYSE:LO) as it is growing at a high rate and it is the brand with the largest market share in the electronic cigarette market. Lorillard Inc. (NYSE:LO) has a 40% or so market share in this market, representing $57 million in sales in the first quarter of 2012 as noted in its earnings release. With the aggressive advertising of Blu, I expect this quarterly sales amount to increase over time. In the long run, I believe that this is a part of the company that has the potential to be spun off in the future.
Conclusion
I believe that these are great companies to add to a long term portfolio. I own shares in all three companies.
Based on the fact that they all pay a healthy dividend and that they have strong businesses, these are all very solid companies. They produce consistent profits that are expected to grow, and they all have exciting potential for the future with the possibility of additional shareholder value based on the brands and businesses that they are involved with.
The article 3 Top Tobacco Dividend Stocks originally appeared on Fool.com and is written by Anthony Parsons.
Anthony Parsons owns shares of Altria Group, Lorillard, and Reynolds American. The Motley Fool has no position in any of the stocks mentioned. Anthony is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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