Summary
- Tobacco companies have historically made excellent high-yield investments delivering steady dividend growth and market-crushing returns.
- Today fear of rising anti-tobacco regulations and ongoing declines in smoking rates means that this high-yield industry is one of the most hated on Wall Street.
- Philip Morris and British American Tobacco have seen their shares gutted over the last 18 months, creating extremely attractive deep value, high-yield investing opportunities.
- Philip Morris is objectively the higher quality company, with a lower risk profile, stronger balance sheet, better profitability, and superior long-term growth prospects.
- But British American is now so undervalued that it's likely to deliver better total returns, making it the superior investment today (though both stocks are worth buying).
(Source: imgflip)
Like many of you, I'm a passionate dividend growth investor and there's nothing I love more than a fat, juicy yield. BUT there is a huge difference between a yield trap (unsafe dividend likely to be cut) and a safe deep value high-yield company worth buying with both hands.
Thus my new Deep Value Dividend Growth Portfolio or DVDGP (beating the market by 9.4% since inception) is 100% focused on quality, low-risk dividend growth stocks, bought opportunistically, typically when the market hates them most.
The goal is to only buy well run companies, with strong cash flows, sound balance sheets, and good long-term growth prospects that will deliver safe and rising income in all economic/industry and interest rate conditions.
One of the most hated industries right now is tobacco, which has traditionally been beloved by high-yield investors for its low volatility, recession-resistant cash flow and great track record of outperformance (despite the industry's numerous risks over the decades).
