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MO, PM, and BTI are the best tobacco stocks to buy in 2022.
Best Tobacco Stocks: Background
Tobacco stocks have a controversial history of regulatory and ethical dilemmas. However, after decades of effective lobbying and consolidation, the best of the best remains.
Here are the best tobacco stocks to buy in 2022:
- Altria Group (MO)
- Philip Morris International (PM)
- British American Tobacco (BTI)
In the next section, we will analyze each of these stocks in greater detail to help you decide which ones (if any) are best for your portfolio.
Best Tobacco Stocks
#1. Altria Group (MO)
- 1-Year Trailing Returns: +2.24%
- Market Cap: $94 billion
- Dividend Yield: 6.81%
Altria Group is one of the world’s largest producers and marketers of tobacco and cigarettes.
The company is known for its high dividend yield. It has a long-term objective of a dividend payout ratio target of around 80% of its adjusted diluted EPS.
Altriaexpects to deliver $4.93 adjusted diluted EPS for the full-year 2022, representing a 7% growth rate.
The company returned more than $8.1 billion in cash to shareholders in 2021 via dividends and share repurchases. This was the third-largest single-year cash return in the company’s history and the largest annual return in two decades.
#2. Philip Morris International (PM)
- 1-Year Trailing Returns: +5.21%
- Market Cap: $146 billion
- Dividend Yield: 5.47%
Philip Morris is a Swiss-American cigarette and tobacco manufacturing company with products in over 180 countries – and the company that brings you Marlboro darts.
Philip Morris was founded in 1847 and was the centerpiece of the “Big Tobacco” industry when people realized cigarettes negatively affected health in the 50s and 60s.
In Philip Morris’ most recent earnings report, diluted EPS increased by 17.6% to $6.08 – or increased by 15.3% excluding currency debasement (PM includes inflation-adjusted year-over-year growth metrics in theirearnings reports).
#3. British American Tobacco (BTI)
- 1-Year Trailing Returns: +6.60%
- Market Cap: $96 billion
- Dividend Yield: 7.09%
The British American Tobacco company was founded in 1902 in London. Like the previous two companies we have covered, BTI manufactures and sells cigarettes, tobacco, and other nicotine products.
British American Tobacco has the lowest price-to-earnings ratio amongst the three best tobacco stocks.
It trades around 10x earnings while MO and PM are around 38x and 17x, respectively.
BTI pays out the highest dividend yield of any stock on our list. It’s also been the best performing tobacco stock of the last 12 months.
Tobacco stocks generally fall into the consumer staples sector of the economy.
So, if you’re hesitant to invest in one of these tobacco stocks, then consider a more diversified consumer staples ETF listed below:
- Vanguard Consumer Staples ETF (VDC)
- Consumer Staples Select Sector SPDR Fund (XLP)
- iShares Global Consumer Staples (KXI)
- Invesco S&P 500 Equal Weight Consumer Staples ETF (RHS)
Also, there are more than three tobacco stocks on the market.
Other prominent companies in the industry include Universal Corporation (UVV), Vector Group (VGR), and Imperial Brands (IMBBY: OTC).
What is the best tobacco stock?
The best tobacco stocks are Altria Group (MO), Philip Morris International (PM), British American Tobacco (BTI), Imperial Brands (IMBBY), and Vector Group (VGR).
Are tobacco stocks a good buy?
Tobacco stocks are a good buy if you seek high dividend yields from companies with stable earnings. Tobacco stocks tend to trade at reasonable multiples, and they tend to be more resilient to economic turmoil than your average stock.
What is the most successful tobacco company?
The most successful tobacco companies globally are Philip Morris International (PM) and British American Tobacco (BTI) by revenues and stock performance.
Is there a tobacco ETF?
There is not a pure-play tobacco ETF, but there are plenty of exchange-traded funds that hold the best tobacco stocks, such as the Schwab U.S. Dividend Equity ETF (SCHD), the SPDR S&P 500 ETF Trust (SPY), and the Consumer Staples Select Sector SPDR Fund (XLP).
Bottom Line: Best Tobacco Stocks
Survival (and consolidation) of the fittest allows us to identify the best tobacco stocks. Consider MO, PM, and BTI if you’re interested in this consumer staples niche.
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the stocks in this article.