The tobacco industry's future hasn't been easy to discern lately, what with all those warnings from the health-care camp and lawsuits from the legal arena. There are additional interesting developments afoot, though. For example:
- Cigarette companies are downsizing while they advertise the health risks associated with smoking.
- Sales of cigarettes in the United States are sagging. According to one report, some 23% of American adults today smoke, compared to 42% back in 1964.
- Many farmers are harvesting their last crops of tobacco, as they hope for a five- or six-figure government buyout.
That's right -- there's movement in Congress to offer tobacco farmers a significant lump-sum payment in order to entice them to give up their current livelihood. More specifically, the buyout would be compensating farmers for phasing out various economic protections they've enjoyed since the 1930s via a system that supported tobacco prices and regulated production. (Europe is also looking into dropping its tobacco-protection systems.)
States such as Kentucky and the Carolinas have been looking for $13 billion in buyouts, to be paid over six years. Lest you find yourself suddenly tightly clutching your wallet, know that the money would come from further taxes on tobacco products.
A recent Reuters article notes that the buyout wouldn't end tobacco farming. It would mean the loss of many small farmers who couldn't afford to continue in the new system, but large farmers might actually see production levels increase, permitting them to profit even on lower prices as they compete with foreign growers.
Investors in tobacco companies such as Altria
Finally, remember that if you don't have a good handle on an industry or company, if you don't have much confidence in its future prospects, then perhaps you shouldn't invest in it. Your money should be parked where you're fairly confident it will do well for you.
And if it's the hefty dividend yields of tobacco companies that appeal to you, consider looking for some other high-yield companies in less-uncertain industries -- our Motley Fool Income Investor newsletter will send you several candidates each month.