The 13F reported that the fund had 1.3 million shares of fellow cigarette company Lorillard Inc. (NYSE:LO) in its portfolio at the beginning of January, down slightly from three months earlier. With Lorillard’s business being more mature on average, it pays a considerably higher dividend yield than Philip Morris (at 5.5%) and has a lower beta at 0.4. So it is a strong candidate for income or defensive investors. In addition, it is arguably a value stock given its trailing and forward P/E multiples of 14 and 12 respectively.
Renaissance owned 2.9 million shares of GlaxoSmithKline plc (NYSE:GSK) at the end of 2012. GlaxoSmithKline has the most generous yield of the companies on this list, at 5.9%, and as a drug manufacturer it too is moderately well insulated from macro conditions. However, it has also been reporting weak financials recently and so we would need to look more closely at the company before buying rather than focusing entirely on the dividend payments.
We’d be a bit concerned about the recent results at the pharmaceutical companies, though GlaxoSmithKline’s yield is high enough that income investors should look into the business anyway. The cigarette manufacturers look a bit better, with Lorillard in particular offering an attractive combination of income and value. With Intel we are concerned about the business and even though the valuation is low we think it would be best to see a quarter or two of more stable performance before considering a position.
Disclosure: I own no shares of any stocks mentioned in this article.