Dividend paying companies have gaining popularity in the markets in 2012. With interest rates as low as they are investors are looking at dividend paying stocks for investment income, where returns currently far exceed those of bonds. The Cigarette Industry has been home to some of the safest dividend investments in the market. Even during the recession, when many companies slashed dividend payments, cigarette manufacturers did not. Five Star Equities examines the outlook for companies in the Cigarettes Industry and provides equity research on Altria Group, Inc. (NYSE: MO) and Philip Morris International Inc. (NYSE: PM).
- Logos of Altria and Philip Morris International
Tobacco companies have been experts in dealing with adverse conditions. Negative publicity in the U.S. has sent demand for tobacco down in recent years; however, companies have been able to maintain stable revenues by merely raising the price of cigarettes. With stable profits cigarette companies have been able to keep their high yielding dividends intact.
A proposed law in Australia may prevent a new challenge for the tobacco industry. The Australian government wants impose the first ever ban of logos on cigarette packs. The proposed law would see cigarettes sold in dark olive-brown packages, with graphic images of diseases caused by smoking replacing corporate logos. Countries such as New Zealand, Canada, Belgium, Iceland, and France have all expressed interest in adopting a packaging law like Australia.
In April 20, 2012, Altria‘s annualized dividend yield was 5.1%. Altria expects to continue to return a large amount of cash to shareholders in the form of dividends by maintaining a dividend payout ratio target of approximately 80% of its adjusted diluted EPS.
Phillip Morris currently offers investors a dividend yield of 3.4 percent. The company recently reported first quarter results: Net revenues, excluding excise taxes, were up by 9.7% to $7.4 billion, or by 10.9% excluding currency and acquisitions. The company reported earnings per share of $1.25, up by 17.9%, or by 19.8% excluding currency, versus $1.06 in 2011.