An increase in the number of smokers globally over the past few years is driving the growth of the cigarette market. In addition, in response to growing public awareness of the health risks associated with tobacco use, tobacco companies have been producing and marketing next-generation, low-risk tobacco products. According to PRNewswire, the global next-generation tobacco product market size is expected to reach $67.38 billion in 2030, growing at an 11.8% CAGR during the 2022 - 2030 forecast period.
Cigarette manufacturers have developed various substitutes, such as filter-tipped cigarettes, e-cigarettes, menthol cigarettes, low tar cigarettes, and others, keeping in mind strict FDA regulations on nicotine consumption. In addition, other factors, such as an increase in the number of female smokers and a rising preference for flavored cigarettes, will likely keep the industry’s momentum going.
Given this backdrop and the current market volatility, we think it could be wise to bet on fundamentally sound tobacco stocks Philip Morris International Inc. (PM), British American Tobacco p.l.c. (BTI), Altria Group, Inc. (MO) and Vector Group Ltd. (VGR). The dividends paid by these stocks yield more than 5%.
Philip Morris International Inc. (PM)
PM, through its subsidiaries, manufactures and sells cigarettes, other nicotine-based products, smoke-free products, and related electronic devices and accessories. It also offers IQOS smoke-free products, including heated tobacco and nicotine-containing vapor products under brands like HEETS, HEETS Creations, HEETS Dimensions, and other licensed brands.PM is based in New York City.
PM’s $5.00 annual dividend yields 5.4% at its current share price. Also, it has a four-year average dividend yield of 5.5%. Its dividend payouts have increased at a 3.5% CAGR over the past five years.
In the fourth quarter, ended Dec.31, 2021, PM’s net revenue increased 8.9% year-over-year to $8.10 billion. Its operating income grew 1.4% from its year-ago value to $2.95 billion, while its net earnings grew 5.9% from the prior-year quarter to $2.09 billion. The company’s EPS has increased 5.5% year-over-year to $1.34.
The consensus EPS estimate for its fiscal year 2022 represents a 2.5% improvement year-over-year to $6.23. Analysts expect its revenue to increase 2.1% year-over-year to 32.06 billion for its fiscal 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock gained 5.9% in price over the past year and 2.1% over the past three months.
PM’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock also has an A grade for Quality and a B for Stability. Within the B-rated Tobacco industry, it is ranked #5 of 12 stocks.
To see additional POWR Ratings for Growth, Value, Sentiment, and Momentum for PM, click here.
British American Tobacco p.l.c. (BTI)
Headquartered in London, BTI provides tobacco and nicotine products to consumers internationally. Through its retail outlets, it offers vapor, tobacco heating products, and modern and traditional oral products, such as snus and moist snuff.
While the four-year average dividend yield for BTI is 6.8%, its current dividend translates to a 7.2% yield. The company's dividend payouts have increased at a 6.2% CAGR over the past five years.
During its fiscal year ended Dec. 31, 2021, BTI's revenue amounted to €25.68 billion ($28.33 billion). Its profit for the year increased 6.2% year-over-year to €6.97 billion ($7.69 billion), while its cash and cash equivalent stood at €2.81 billion ($14.11 billion). The company's EPS rose 6% from the prior-year period to 295.6p.
Analysts expect BTI’s revenue to increase 2.3% year-over-year to $35.59 billion for its fiscal year 2022. The $4.90 consensus EPS estimate represents a 9.3% improvement year-over-year for its fiscal 2022. The company’s shares have surged 9.7% in price year-to-date and 11.8% over the past three months.
BTI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. BTI is also rated A for Sentiment and B for Stability. Within the Tobacco industry, it is ranked #4.
In total, we rate BTI on eight distinct levels. To see additional POWR Ratings for Growth, Value, Momentum, and Quality for BTI, click here.
Altria Group, Inc. (MO)
MO manufactures and sells smokable and oral tobacco products in the United States through its subsidiaries. The Richmond, Va.,company provides cigarettes primarily under the Marlboro brand; cigars and pipe tobacco principally under the Black & Mild brand; and moist smokeless tobacco products under the Copenhagen, Skoal, Red Seal, and Husky brands.
The company’s $3.60 annual dividend yields 7.1% on its current share price. Also, it has a four-year average dividend yield of 6.8%. In addition, the company’s dividend payout has increased at an 8.4% CAGR over the past five years.
MO's net revenue amounted to $6.26 billion for the fourth quarter, ending Dec. 31, 2021. Its operating income increased 5.9% year-over-year to $2.73 billion, while its net earnings came in at $1.62 billion. The EPS amounted to $0.88 over this period.
MO is expected to generate $4.91 billion in revenue, representing 0.7% year-over-year growth for the first quarter, ending March 31, 2022. The $1.09 consensus EPS estimate for the first quarter, ending March 31, 2022, indicates a 2.2% improvement year-over-year. In addition, the company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters. Its stock has gained 8.1% in price year to date and 13.6% over the past three months.
It is no surprise that MO has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Quality and a B for Growth. In the Tobacco industry, it is ranked #2.
Click here to see the additional POWR Ratings for MO (Value, Stability, Sentiment, and Momentum).
Vector Group Ltd. (VGR)
VGR in Miami, Fla., manufactures and sells cigarettes in the United States through its subsidiaries and has two operational segments Tobacco and Real Estate. The company produces cigarettes in 100 combinations under the EAGLE '20s, Pyramid, Montego, Grand Prix, Liggett Select, Eve, USA brand names, and various partner and private label brands.
VGR’s $0.80 annual dividend yields 7.7% at the current share price. It has a four-year average dividend yield of 6.6%.
In the fourth quarter, ended Dec. 31, 2021, VGR’s total revenue increased 9.2% year-over-year to $313.67 million. Its operating income amounted to $68.56 million, while its net income grew 40.5% from the prior-year quarter to $45.31 million. The company’s EPS has increased 38.1% year-over-year to $0.29.
Analysts expect its revenue to increase 1.5% year-over-year to 1.24 billion for its fiscal year 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
VGR's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. VGR is also rated B for Quality and Value. Within the Tobacco industry, it is ranked #3.
Click here to see additional POWR Ratings for Growth, Stability, Momentum, and Sentiment for VGR.
PM shares were trading at $89.54 per share on Friday afternoon, down $2.35 (-2.56%). Year-to-date, PM has declined -5.75%, versus a -10.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
The post 4 High-Yield Tobacco Stocks to Add to Your Dividend Portfolio appeared first on StockNews.com
