Activist investing and special situations for the retail side.

5 Tobacco Smokin' Dividend Picks

Added on by Lee Ho Fook.

Although the tobacco industry is somewhat controversial, it is a cash flow generating machine, and fortunately for investors, these companies reward shareholders with sizable dividends. The question is; what's the best tobacco play in the industry. Well for starters, all the major tobacco companies pay a dividend that yields at least 3.5%, but there are some distinct differences among the industry leaders. Let's see which dividend paying tobacco company is the best. Of the five tobacco companies listed below, I like two, one a U.S. operator, and the other a global tobacco company.

Altria Group Inc (MO) pays a 5.2% dividend yield and recently reported quarterly results that showed earnings up 32% year over year. One of the beauties of Altria's 5.2% dividend yield, although it is the lowest among the major U.S. operators, is that it only represents an82% payout of earnings, which is very nice when stacked up against its peers.

Altria's top brand includes Marlboro, but part of its continued strength and anchor to its future growth is its smokeless segment, where the smokeless business line saw volumes up 10% last quarter on a year over year basis. Two of Altria's strongest smokeless brands include Copenhagen and Skoal, with other initiatives including collaboration with Okono to develop non-combustible nicotine-containing products, and Verve Dics, a mint-flavored, chewable tobacco containing tobacco-derived nicotine. Taking a deeper look at Altria's smokeable segment, we find other notable brands beyond its stable cigarettes. This includes its Black & Mild brand, which has a leader in the space.

Altria is the top U.S. market share leader…