Kalkine Media lists tobacco stocks to watch in October

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Kalkine Media lists tobacco stocks to watch in October

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 Kalkine Media lists tobacco stocks to watch in October
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Highlights:

  • Altria Group's dividend yield was 9.02 per cent.
  • Vector Group Ltd. (NYSE: VGR) noted over 14 per cent growth in its Q2 FY22 revenue.
  • British American Tobacco Industries, p.l.c. (NYSE: BTI) revenue jumped over five per cent YoY in the first half of fiscal 2022.

The tobacco industry is traditionally regarded as recession-proof by some analysts. However, given the present market conditions, predicting how a sector might perform is difficult.

According to the Centre for Disease Control and Prevention, nearly 40 million US adults used tobacco products in the United States.

Some of the companies that are in the tobacco industry are Altria Group, Inc. (NYSE: MO), Vector Group Ltd. (NYSE: VGR), Universal Corporation (NYSE: UVV), Philip Morris International Inc (NYSE: PM), and British American Tobacco Industries, p.l.c. (NYSE: BTI).

Although the sector doesn't guarantee that it will hold a steady momentum during an economic downturn, some of the companies mentioned above distribute dividends.  

There is no hard and first rule that the tobacco companies would pay a dividend to the traders. Kalkine Media® is exploring some tobacco stocks, and let's see how they performed:

Altria Group, Inc. (NYSE: MO) 

Altria Group had a dividend yield of 9.02 per cent at the time of writing. It is one of the leading producers and sellers of tobacco and other related products, and its P/E ratio was 42.63.

The stock of Altria Group decreased by over 11 per cent in 2022 while trading flat in the current quarter. In the last 12 months, the MO stock gave up about 13 per cent of its price. Notably, the stock touched its 52-week low of US$ 40.84 last Friday, September 23.

Altria had raised its dividend by 4.4 per cent to US$ 0.94 per share compared to its prior dividend of US$ 0.9. The dividend would be payable on October 11, 2022, the tobacco firm said on August 25. 

The US$ 74.7 billion market cap firm's revenue decreased by 5.7 per cent YoY to US$ 6.54 billion in Q2 FY22. Meanwhile, Altria Group's reported diluted EPS fell 57.8 per cent YoY to US$ 0.49 apiece in Q2 FY22.

Vector Group Ltd. (NYSE: VGR)

Vector Group is a diversified holding firm with a dividend yield of nine per cent. The company, which owns and operates discount tobacco brands, had a P/E ratio of 8.14.

The VGR stock tumbled about 21 per cent YTD while decreasing about seven per cent in one year. In the third quarter through September 26, its price declined around 15 per cent.

The US$ 1.34 billion market cap company's total revenue rose 14.7 per cent YoY to US$ 387.2 million in Q2 FY22, while its revenue from the tobacco segment surged 13.6 per cent YoY to US$ 374.3 million.

The Miami, Florida-based company's net income declined to US$ 39.2 million in Q2 FY22 from US$ 93.3 million in Q2 FY21.

Universal Corporation (UVV) Q1 FY23 VS Q1 FY22 earnings highlightsSource: ©Kalkine Media®; © Canva Creative Studio via Canva.com

Universal Corporation (NYSE: UVV)

Universal Corporation is another tobacco company with a dividend yield of 6.7 per cent. The tobacco firm, having a P/E ratio of 13.35, focuses on supplying tobacco leaves.

The UVV stock has lost about 17 per cent from its price in the running year while decreasing nearly five per cent YoY. Its price was down around 23 per cent in the third quarter through September 26.

Universal Corporation declared a quarterly dividend of 79 cents apiece on its common shares on August 3, payable on November 7, 2022.

The Virginia-based tobacco company's sales and other operating revenue rose 23 per cent YoY to US$ 429.8 million in Q1 FY23. The diluted EPS of Universal Corporation rose four per cent or by US$ 0.01 to US$ 0.27 apiece in Q1 FY23.

Philip Morris International Inc (NYSE: PM)

Philip Morris is a multinational tobacco firm with a dividend yield of 5.45 per cent. The company operates in various international markets with a P/E ratio of 15.61.

The stock of the US$ 139.91 billion market cap firm plunged about three per cent in 2022 through September 26 while dropping about seven per cent QTD. Its price lost about nine per cent YoY.

The tobacco company announced a 1.6 per cent hike in its regular quarterly dividend to an annualized rate of US$ 5.08 apiece on September 14. The new quarterly dividend, payable on October 12, is US$ 1.27 per share.

Philip Morris's revenue grew 3.1 per cent YoY to US$ 7.83 billion, of which 29.9 per cent is generated from its smoke-free products. The US$ 139.91 billion market cap company's total earnings rose 2.1 per cent YoY to US$ 2.34 billion in Q2 FY22.

British American Tobacco Industries, p.l.c. (NYSE: BTI)

As the name suggests, it is a British tobacco firm with a dividend yield of 7.07 per cent. The US$ 81.52 billion market cap company specializes in producing and selling cigarettes, tobacco, and other nicotine-related products.

The BTI stock plummeted about two per cent YTD while decreasing nearly 15 per cent QTD. On a YoY basis, the stock of the British tobacco company traded flat.

British American Tobacco's revenue rose 5.7 per cent YoY to £ 12.86 billion in the first half of fiscal 2022. Its diluted EPS was 80.8 pence for the first half that ended on June 30, 2022, down by 42.9 per cent YoY.

Bottom line

Due to their impact on health and other related factors, tobacco stocks often come under criticism from several investors, especially from environmental-focused investors.

The Dow Jones US Tobacco Index slipped over six per cent YTD while falling about four per cent QTD and about five per cent in September. Hence, investors should consider the uncertain conditions and challenges the sector has recently faced before putting their bets on the sector.

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