The other important factor buoying tobacco stocks among dividend investors is the valuations attached to these companies’ shares.
Buy discount cigarettes here
After all, tobacco stocks weren’t particularly pricey to begin with, giving them some room to run. If your average stock on the S&P 500 today costs a bit more than 14 times forward earnings to purchase, then all four of these stocks charge less than that. Altria Group Inc (NYSE:MO), Reynolds, and BAT all sell for about 13 times earnings and change. Lorillard Inc. (NYSE:LO) is a relative bargain at just 12.1 times forward earnings.
And of course, the real attraction of these stocks is their generous dividend payments. From a very respectable 2.5% dividend yield at BAT — two-tenths of a percent more than the average S&P stock pays — dividend yields among this group of stocks quickly rocket up the scale to Altria Group Inc (NYSE:MO)’s premium 5.1% yield, to 5.3% at Reynolds, and a whopping 5.4% at Lorillard Inc. (NYSE:LO).
Like a nice, long drag on a smoke, there’s nothing quite like a big, fat dividend yield to ease investors’ worries when Big Government tries to stress ’em out.
The article Dividend Investors Shrug Off Mayor Bloomberg’s Anti-Smoking Campaign originally appeared on Fool.com.
Fool contributor Rich Smith and The Motley Fool have no position in any of the stocks mentioned.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.