Lorillard: 4.8% Dividend Yield and its Newport Brand is Gaining Market Share

Everybody knows tobacco stocks’ long-term growth prospects are dismal. Meanwhile, plentiful cash flow and reliable profits let industry players pay out appealing dividends. Lorillard (LO) – which derives almost all of its revenue from its hugely popular Newport brand cigarette – offers a slightly lower yield than rivals like Marlboro maker Altria (MO) and Camel brand producer Reynolds American (RAI).

LO Dividend Yield Chart

LO Dividend Yield data by YCharts

A straight-up dividend yield comparison may not include all the positives the nation’s number-three cigarette maker offers dividend investors, however. For one thing, Lorillard is widely seen as a buyout prospect in the future, a likely target either for a domestic or a foreign rival. Less speculatively, Newport’s popularity is so strong that the brand continues to gain market share in a weakening U.S. tobacco market. Even though non-operating items pinched the latest quarter’s net, Lorillard’s earnings yield compares well with its competitors.

LO Earnings Yield Chart

LO Earnings Yield data by YCharts

While its yield’s a tad slimmer than that offered by its bigger rivals, Lorillard’s booming Newport brand may offer better growth prospects: this 252-year-old company’s shares deserve a long look from dividend investors. Of course, whenever we buy a stock in search of income, we’re also purchasing the underlying security, and before committing it just makes sense to study up on the company’s fundamentals, and probably to read through its 10-K.

James P. Miller is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.

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