Habit-Forming Tobacco Stock Dividend Yields: It’s Hard to Keep This Damned Thing Lit

Treasury markets are hitting fresh lows, but the dividend yields at tobacco stocks like Reynolds American (RAI), Altria (MO) and Lorillard (LO) are smoking:

RAI Dividend Yield Chart

RAI Dividend Yield data by YCharts

The Wall Street Journal points out that they come with extremely high payout ratios, which means the companies are using up most of their earnings to pay dividends. The current average payout ratio among S&P stocks is 28%, according to the story, but it's a lot higher here:

RAI Payout Ratio TTM Chart

RAI Payout Ratio TTM data by YCharts

Meanwhile the stocks’ cash dividend payout ratios, which YCharts explained in detail here, are also running high:

RAI Cash Div. Payout Ratio TTM Chart

RAI Cash Div. Payout Ratio TTM data by YCharts

The Journal worries that investors are paying too much for income from tobacco stocks, especially considering a declining U.S. market, myriad lawsuits, and the potential for more marketing restrictions. The payout charts shouldn’t inspire confidence, either.

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.



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