The tobacco industry isn’t a favorite of everyone but these companies do pay dividends that average about twice the average dividend of the S&P 500 and beat Treasury yields by a mile. I don’t own any of these stocks, but investors looking for consistently high, rising dividends may want to take a closer look.
The industry continues to face litigation, albeit at a much lower intensity than a few years back, and will likely continue to for the foreseeable future. However, the leaders of these companies are taking steps to offset volume losses in mature markets. The two most promising trends have been to focus on emerging markets and to spend more marketing budget on smokeless tobacco products.
The industry is also looking at other nicotine-related products. I don’t like the sound of that one, but I thought you should know what they’re up to. The emerging markets and smokeless tobacco products are moves away from regulation as neither has the scrutiny of cigarettes. The prospects are decent that these companies will be able to increase profits, cash flows and dividends well into the future.
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