Tobacco stocks are some of the consistent long-term winners in terms of both income and total returns. In a recent speech, two of the star rated fund managers in the UK noted their preference for stocks in this industry. Star fund managers Terry Smith and Neil Woodward noted a few reasons that support their views.
From an article in the CityWire UK:
While Smith and Woodford were agreed on banks, they also share a fondness for tobacco stocks.Imperial Brands (IMB), formerly known as Imperial Tobacco, is Woodford’s biggest holding, and he also owns British American Tobacco (BATS) andReynolds American (RAI.N), having long been a backer of the sector. Smith is also an investor in Imperial Brands, alongside Philip Morris (PM.N).
While sceptics of the sector point to the mounting regulatory pressure on smoking and the rise of e-cigarettes as threats, Smith said they would have the opposite effects.
Bans on advertising and marketing had only served to erect barriers to new entrants to the sector, boosting the profitability of the market leaders, while e-cigarettes could expand the industry by allowing existing smokers more opportunities to smoke,’ he said.
‘The tobacco industry has been good for a period of time, and has been turbocharged by government action against the industry,’ he said.
Source: Terry Smith: I’d take a recession over a ‘lost decade’, CityWire UK
At a pretty basic level, tobacco firms operate in a unique environment in that the main ingredient in the product comes from a source that is very cheap to grow and the product is addictive.
Five tobacco stocks trading on the US markets are listed below with their current dividend yields:
1.Company: Reynolds American Inc (RAI)
Current Dividend Yield: 3.42%
2.Company: British American Tobacco PLC (BTI)
Current Dividend Yield: 3.61%
3.Company: Imperial Brands PLC (IMBBY)
Current Dividend Yield: 2.66%
4.Company: Philip Morris International, Inc. (PM)
Current Dividend Yield: 4.06%
5.Company: Altria Group Inc. (MO)
Current Dividend Yield:3.64%
Note: Dividend yields noted above are as of April 19, 2016. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.
Disclosure: No Positions