Lorillard is probably the most attractively valued domestic tobacco company stock that investors could buy today. You’ve got a company that is buying back about 15 million shares of stock each year, raising the dividend by a rate around 10%, and the company is using its free cash flow to move into the e-cigarette market. Oh, and the Newport brand, which makes up 87% of the company’s sales, remains remarkably strong. The company trades at a little over 13x earnings, and gives investors a dividend yield over 5%. Any way I run the numbers, it seems that investors should experience total returns of at least 10% annually over the next 5-10 years, and considering that you have a growing 5% yield, it seems reasonable to think that at least half of your total returns will be in the form of cold, hard cash from the dividend.
Originally posted 2013-06-06 19:34:44.