Why Vector Group Is Poised to Underperform

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, cigarette maker Vector Group (NYSE: VGR  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Vector and see what CAPS investors are saying about the stock right now.

Vector facts

 

 

Headquarters (founded)

Miami, Fla. (1911)

Market Cap

$1.4 billion

Industry

Tobacco

Trailing-12-Month Revenue

$572.3 million

Management

CEO Howard Lorber

CFO Bryant Kirkland

Return on Capital (average, past 3 years)

21.9%

Cash/Debt

$434.3 million / $645.6 million

Competitors

Lorillard

Reynolds American 

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 9% of the 298 members who have rated Vector believe the stock will underperform the S&P 500 going forward.

Just last week, one of those Fools, All-Star NovaTodd, tapped Vector as a particularly unsustainable income opportunity:

This company has been paying out a dividend that exceeds free cash flow for five years now. There has also been a consistent trend of dilution that has been eroding existing shareholder's value. Herbert Stein's dictum that "if something cannot go on forever, it will stop" is probably relevant here. I'm betting on a dividend cut at some point which will likely send shares tumbling.

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