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Altria Group Inc (MO), Lorillard Inc. (LO): Continue Buying the Smoking-Hot Cigarette Stocks

Highest dividend yield

Reynolds American, Inc. (NYSE:RAI) has the largest dividend yield in the group of 5.3%, but the stock also trades at the highest forward multiple of over 14 times 2014 estimates. Analysts only expect earnings to grow around 7.5% in the next five years. The company spent $1.1 billion on buybacks during 2012 and started 2013 with $325 million in repurchases for Q1.

Reynolds American, Inc. (NYSE:RAI) plans a national roll-out of its Vuse e-cig starting next month in Colorado.

Bottom line

While the sector has seen strong gains in the last three years, the stocks still offer some of the highest yields in the market along with management teams that continue to see the stocks as attractive. Based on the fastest earnings growth and lowest earnings multiple, Lorillard Inc. (NYSE:LO) provides the most intriguing valuation. Not to mention, the company has been the fastest to move into the growing e-cig segment and could obtain a dominant position before the two larger competitors even get going.

The article Continue Buying the Smoking-Hot Cigarette Stocks originally appeared on and is written by Mark Holder.

Mark Holder and Stone Fox Capital Advisors, LLC own shares of Lorillard. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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