Altria Group Inc (MO)

Cigarette sales are declining causing stock prices to decline. He has a model price of $77, with 40% upside potential. If it moved lower he would be interested. He would buy here and more near $54. Yield is 5%.

Tobacco stocks have had a fabulous 12 months. This is a great company, and if you hold it for the long-term, you will be well rewarded.

The performance has been pretty strong, but more recently it was a sideways mover and now dropped after the announcement that they wanted to drop the nicotine in cigarettes. It is not really cheap any more at 19 times earnings, growing in the single digits.

They had a really nice run-up. She would not advise new positions at these levels. It is part of a defensive part of your portfolio with a really good dividend yield. They are increasing profits by rising prices.

One of the things about the sin stocks, particularly tobacco, is if you continue to hold them, you will be well rewarded. They pay big dividends and increase the dividends over time. If they sold off SIB Miller, there could be a one-time special dividend. He likes the whole category. A great company.

In tobacco, he likes this a bit more because the US$ is going to be continuously bullish going through the next couple of years. Phillip Morris (PM-N) is based on international operations, where Altria is based on domestic revenues. Phillip Morris has dropped below its 200-day moving average. After many years of these tobacco stocks doing extremely well and paying a nice dividend, the investment market has started to step away from some of these names. They’ve gotten very expensive. Dividends are good, but are probably not going to grow very quickly. In a rising interest rate environment, these look less and less attractive.

The difficulty with tobacco stocks is that they performed so well. They are the ultimate cash flow generative businesses. There has been a bit of a pullback, but over the long-term, it has been one of the best performing stocks. There could be a damper on tobacco stocks if the governments start increasing taxes for health reasons.

It moved higher and higher and pulled back with the market as a hold. People often don’t want to invest in this. It is very well run. $60 is a good entry point with a long term horizon.

(Market Call Minute.) He really likes tobacco. They are doing all the right things. This is still very investable.

She doesn’t buy cigarette stocks in general because the industry is in a secular decline, even though they generate a lot of cash. This is a very defensive name with a high yield, but you can get that yield in other companies that are in a more positive growth industry.

(Market Call Minute) Has been a great cash cow over the years.

Cigarette company that is the domestic business of PM-N, but MO-N has not done as well. They have a ton of free cash flow and pay a good dividend. They could continue to do well.

Stock has done extremely well. This is on the back of always having been viewed as a real strong income play, especially in this low interest rate environment. Although there is an uphill battle in terms of regulations and the social stigma of smoking and the numbers are on the decline, what is happening now, after all of these years, is that they have a real growth category which is E-cigarettes. Over the last couple of years their E-cigarettes has tripled and has given people a reason for hope.

These companies throw off tons of cash. Historically, have been great dividend payers with good yields. Couple of headwinds: Contra banned cigarettes and E-cigarettes. There is always the pressure due to health concerns and extra taxation. They will continue to increase dividends, are a good place to be if you don’t have ethical concerns. They are North American, but Phillip Morris is in Asia where smoking is more acceptable.

A best performing stock. Good dividend growth. May come out with their own versions of electronic cigarettes.