Lorillard
| Millions | 2011 | 2012 | Q1 2013 | Average Return |
|---|---|---|---|---|
| Number of shares in issue (Billions) | 417 | 389 | 378.6 | |
| Total dividend (Billions) | $723 | $807 | $209 | |
| Total repurchases (Billions) | $1,580 | $573 | $149 | |
| Returned per share | $5.52 | $3.55 | $0.95 | |
| Average share price | $35.00 | $40.00 | $39.40 | |
| Total returned | 15.8% | 8.9% | 2.4% | 11.4% |
Figures in $
Lastly, Lorillard Inc. (NYSE:LO), which appears to have given shareholders the best returns out of the whole group. The company has returned around 11.4% to investors annually (based on Q1 2013, the company is set to return an annualized 9.6% this year.) On a per-share basis, both stock repurchases and dividends meant that shareholders each received $5.52 per share in 2011 and $3.55 in 2012; based on the average share price for the year, this was a total cash return of 15.8% and 8.9%, respectively.
But will these returns continue?
| Company | Philip Morris | Altria | Reynolds American | Lorillard |
|---|---|---|---|---|
| Net operating cash flow | $1360 | $1790 | $945 | $699 |
| Cash dividends paid | $1410 | $886 | $326 | $209 |
| Stock repurchased | $1450 | $91 | $325 | $149 |
| Total Retuned | $2860 | $977 | $651 | $358 |
| Cover by cash flow | 0.5x | 1.8x | 1.5x | 2x |
Figures taken from first quarter results; in $ millions
Looking at company cash flows for the first quarter of this year, it would appear that three out of the four companies have plenty of room to continue these high shareholder returns. Indeed, each company, apart from Philip Morris International Inc. (NYSE:PM), is able to cover its cash returns to shareholders at least one-and-a-half times by net operating cash flow.
However, Philip Morris International Inc. (NYSE:PM) is unable to wholly cover its shareholder returns. That said, as I have explored here, Philip Morris is strategically borrowing in order to buyback stock, a strategy that is benefiting the company and generating improving returns without putting a drag on the company’s finances.
Conclusion
It would appear that on a yearly, per-share basis, Lorillard Inc. (NYSE:LO) has returned the most cash to investors. As the smallest company in the group, this does come as a surprise but it also highlights the management’s effectiveness, which should be set to continue.
So overall, for investors who are looking for large returns from their investments, Lorillard Inc. (NYSE:LO) looks to be the company to turn to.
The article Which Tobacco Company Offers the Best Returns? originally appeared on Fool.com and is written by Rupert Hargreaves.
Fool contributor Rupert Hargreaves owns shares of Altria Group (NYSE:MO). The Motley Fool owns shares of Philip Morris International. Rupert 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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