It seems to be the positon of the majority that we are either heading for another recession or a prolonged period of slow growth.
Based on public sentiment and the degrading economic indicators, I am of the opinion that there is between a 25 and 40 percent chance of recession. So it would seem prudent to look at one of the most recession resistant industries: Big Tobacco.
A negative economic outlook seems to do little to inhibit consumers from lighting up. So with the threat of a double dip recession looming and the Fed pledging to keep interest rates low until at least 2013, I feel that the tabacco industry is a great place to look for possible investments.+
Reynolds American (RAI)
Description: Reynolds American Inc. (RAI), through its subsidiaries, manufactures and sells cigarette and other tobacco products in the United States. It offers cigarettes under the brand names of CAMEL, PALL MALL, WINSTON, KOOL, DORAL, SALEM, MISTY, and CAPR. The company also provides smokeless tobacco products, including moist snuff under GRIZZLY and KODIAK brand names. The company was founded in 1875 and is headquartered in Winston-Salem, North Carolina.
Valuation: RAI is currently trading $36.91 which gives it a market cap of 21.52 billion. It places at number four on the list based on its size. It currently has a trailing multiple of 16.05 and a forward multiple of 13.04.
Financial Metrics: Reynolds American has the smallest operating margin at 29.69%. Also at 20.57% it has the lowest return on equity of the five stocks. However, on a positive not it has the lowest debt to equity ratio out of the five companies.
Dividend Analysis: RAI provides a solid $0.53 quarterly dividend which gives it a yield 5.80%. It has the second highest payout ratio on the list at 87%. RAI has been paying out dividends for twelve years and increasing them for the last three.
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