One Tobacco Stock Worth a Look


If you can get past the “sin stock” stigma, this tobacco company is doing everything right and kicking off a solid dividend to boot says Todd Johnson of Investing Daily.

Tobacco stocks as a whole are recession-resistant, providing safety and robust dividend yields, as well as respectable growth.

Case in point: Lorillard (LO) is firing on all cylinders, with the stock at 52-week highs. The stock’s total return so far in 2012 is 26.3%, with a 4.5% dividend yield.

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Lorillard was founded in 1760 in Greensboro, North Carolina, where the company still has its headquarters and all its manufacturing facilities. Lorillard is the oldest and third-largest maker of cigarettes and consumable tobacco in the US, with five brand families: Newport (its flagship brand), Kent, Maverick, Old Gold, and True.

The company’s Newport label is the second-largest cigarette brand and the number-one menthol brand in the US. Lorillard makes and sells 43 products in all, with differences in price, packaging, target-audience positioning, cigarette length, flavor, and taste.

In the face of increasing anti-smoking initiatives tied to public health, Lorillard recently expanded its portfolio to include electronic cigarettes, with its $135 million acquisition in April of bluCigs, a company that makes tobacco-free electronic cigarettes that don’t emit smoke, cigarette smells, or ash residues.

Lorillard in the first quarter of 2012 increased its US cigarette market share from 14.1% to 14.5%. The addition of bluCigs is anticipated to boost corporate sales in future quarters.

Management and sales efforts are focused on offering electronic cigarettes through the company’s vast distribution network.