Select Tobacco Plays Yielding 5% or More After Shares Slide, Dividends Increase

Source from:  Yahoo Finance 08/25/2010

Due to the nature of their products and their historically big dividends, components of the tobacco sector are often considered defensive plays and are known on Wall Street for their reliable cash flows. However, select players in the segment underperformed over the past month, even as the market continued its selloff. As of Monday's close, the Tobacco and Tobacco Product Stocks Index sank -5% over the past month, that compares to the market's -3% slip during that same time period. The -16% monthly move in shares of Universal (NYSE: UVV - News) helped drive the Index lower, as the leaf tobacco producer disappointed investors when it reported earnings earlier this month. However, the recent slide may present an opportunity for some investors, as the firm now has an indicated yield of over 5% based on its latest distribution. In general, stocks of leaf tobacco merchants haven't had a good month, as small-cap player Alliance One International (NYSE: AOI - News) plunged -11% for the month ended Monday. Though the stock doesn't pay a dividend, it has sparked the interest of some institutional investors, including famed value manager Seth Klarman of the Baupost Group. A total of 8 Pro investors counted Alliance One in their top-15 U.S.-listed equity holdings at the start of Q3. Elsewhere in the sector, Lorillard (NYSE: LO - News) announced last week that it will raise its quarterly dividend by 12.5% to $1.125 per share. Despite the dividend increase, shares of the 6% yielding cigarette maker slipped nearly -2% for the week ended yesterday's close. Meanwhile, Vector Group (NYSE: VGR - News), Altria (NYSE: MO - News) and sector giant Philip Morris Intl (NYSE: PM - News) were the only stocks in the Index to move higher during the most recent downturn. The trio jumped 2% or more over the past month and sport yields of 8%, 6% and 4% respectively. Investors should note that the sector faces several headwinds, most notably regulatory and legislation risks. Still, it will be interesting to see if components in the segment are able to stage a comeback, and where yields in the space go from here. As of this writing, the Tobacco and Tobacco Product Stocks Index is one of the top-20 tickerspy Indexes ranked by yield. Fun and informative, tickerspy.com is a free investing website where you can track multiple stock portfolios and compare against 250 proprietary Indexes tracking themes from dividends to ETFs to green energy to precious metals. Best of all, tickerspy.com lets you spy on the portfolios of nearly 3,000 Wall Street institutions and hedge funds and see graphs of their performance. Try tickerspy.com today and find out how you stack up against investing legends like Warren Buffett! Enditem