Is This the Best Tobacco Buy?

Investors frequently have mixed feelings about "sin stocks," particularly tobacco companies.

After all, they're contributing to a worldwide health crisis by distributing poisonous and addictive substances. On the other hand, a loyal and constant consumer base is key to strong long-term stock performance.

If you're comfortable with the ethics of investing in tobacco, then you still need to know which investments are the best choice for your money.

Getting into the numbers
Who are the major tobacco retailers, and how do they stack up to one another?

Company

Market Cap
(in millions)

Revenue, LTM
(in millions)

Free Cash Flow, LTM
(in millions)

CAPS Rating
(out of 5)

Philip Morris International (NYSE: PM  )

$84,390

$25,934

$7,711

*****

British American Tobacco (NYSE: BTI  )

$63,797

$21,029

$5,538

****

Altria (NYSE: MO  )

$40,756

$16,963

$3,173

****

Reynolds American (NYSE: RAI  )

$15,146

$8,484

$1,285

***

Lorillard (NYSE: LO  )

$11,253

$3,842

$1,180

***

Vector Group (NYSE: VGR  )

$1,212

$447

($9)

***

Data from CapIQ, a division of Standard & Poor's, and the Motley Fool CAPS database.

Altria is famous for being the standard-bearer for Wharton professor Jeremy Siegel's assertion that over the long run, stable stocks that pay a good dividend are an investor's best bet, because the combination of low transaction costs and compounded, reinvested dividends makes for extraordinary long-term returns. Altria is currently yielding 7.2%.

But Philip Morris is the favorite of both our CAPS players and our analysts. The international spin-off from Altria, Philip Morris operates in an environment (everywhere but the U.S.) with more opportunity and less regulation.

Which tobacco company do you like and why? Let us know in the comments.

Fool editor Julie Clarenbach doesn't own any of the companies mentioned here. Philip Morris International is a Motley Fool Global Gains pick. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 15, 2010, at 9:10 PM, weiwentg wrote:

    I won't invest in either for personal/social reasons, but I like both and I'd give an edge to Phillip Morris - precisely because of lower regulatory requirements.

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