While many folks find smoking offensive, investors have good reason to view tobacco stocks as “defensive.” Tobacco companies generate lots of cash, and their consumers are quite literally addicted to their products. Perhaps that is why Altria (NYSE:MO) was the only stock in Ben Bernanke's portfolio before he became Fed chairman in 2006.

With all that in mind -- and with my nerves a bit jangly from the recent market dips -- I ran a CAPS screen for highly rated tobacco stocks. Here are the results:

Company

CAPS Rating (out of 5)

Dividend Yield

Alliance One International (NYSE:AOI)

****

N/A

Altria

*****

5.5%

British American Tobacco (NYSE:BTI)

****

5.4%

Imperial Tobacco Group (NYSE:ITY)

****

2.8%

Philip Morris International (NYSE:PM)

*****

3.4%

Vector Group (NYSE:VGR)

****

9.3%

Data from Motley Fool CAPS and Capital IQ, a division of Standard & Poor's, as of July 14.

Remember, in the first year that we have data, five-star companies outperformed the market with an average gain of almost 28% -- four-star companies delivered a return of almost 20%.

These stock ideas are only a starting point in the research process, of course. When selecting tobacco stocks, there are a lot of risks involved, and the savvy investor will want to do quite a bit of due diligence.

Come join us on Motley Fool CAPS to dig into these companies further. Let our 110,000-strong (and counting) CAPS community help you make better stock selections.

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