{"id":417471,"date":"2022-06-14T13:42:15","date_gmt":"2022-06-14T12:42:15","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?p=417471"},"modified":"2025-04-15T09:26:39","modified_gmt":"2025-04-15T08:26:39","slug":"tobacco-stocks","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/share-trading\/invest-in\/tobacco-stocks","title":{"rendered":"Tobacco stock: Popular tobacco companies to invest in"},"content":{"rendered":"

Tobacco stocks have found themselves shunned in recent years amid health concerns and a greater focus on ESG<\/a> (environment, social and governance) investing.<\/p>

Known as a consumer staple, tobacco stocks have long been considered as defensive investments. This is because in all market conditions, people need to go to the shops and buy staples such as foods, drinks and, in the past, tobacco. <\/p>

However as smoking rates have steadily declined around the world and regulation has increased, tobacco companies have found themselves firmly in the spotlight. So is there still a place for these stocks, which were once considered recession proof?<\/p>

UK tobacco stocks<\/h3>

The UK is home to two of the world\u2019s largest tobacco stocks; Imperial Brands and British American Tobacco (BAT)<\/a>. Both are listed on the London Stock Exchange (LSE). <\/p>

\"British<\/div>

British American Tobacco<\/h4>

BAT has long been a popular UK defensive stock and it has been one of the highest yielding stocks on the FTSE 100 for years, as the addictive nature of nicotine means demand for its products stays stable regardless of the economic situation. Currently yielding 6.9%, its high operating profit margin, which topped 30% in 2019, helps to ensure the dependability of the corporate payout. BAT sits in the FTSE 100 and its primary listing is on the LSE. It has secondary listings on the New York Stock Exchange and the Johannesburg Stock Exchange.<\/p><\/div><\/div>

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Buy British American Tobacco shares<\/a><\/p>

\"Imperial<\/div>

Imperial Brands<\/h4>

Formerly called the Imperial Tobacco Group, Imperial Brands is the world\u2019s fourth-largest international cigarette company measured by market share. Listed on the LSE and a constituent of the FTSE 100, its brands include Davidoff, West, Gauloises Blondes, Montecristo, Golden Virginia (the world\u2019s best-selling hand rolling tobacco), Drum (the world\u2019s second-largest-selling fine-cut tobacco), and Rizla (the world\u2019s best-selling rolling paper). Despite dividend growth of just 1% last year, and having to cut its dividend a couple of years ago, the company is currently yielding 8.1% which will be attractive to income investors.<\/p><\/div><\/div>

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Buy Imperial Brands shares<\/a><\/p>

Investing in tobacco shares from the UK<\/h3>

A wave of consolidation in the industry has left just three major players in tobacco, outside of BAT in the UK the two major players globally are Altria<\/a> and Philip Morris International<\/a>. Investing in some global stocks means that you can diversify your portfolio, but you can also encounter foreign exchange fees and fluctuations. <\/p>

\"Altria<\/div>

Altria Group<\/h3>

According to Wharton Professor Jeremy Siegel, Altria Group \u2013 which is the domestic maker of the Marlboro brand \u2013 was the best performing stock on the US market from 1968 to 2017 when including reinvested dividends. During that time the cigarette makers\u2019 annualised average return was 20%. Indeed in the last 50 years, it has raised its dividend 54 times. Given the long-term decline in tobacco smoking, the company has taken steps to diversify away from traditional cigarettes, taking a 35% stake in e-cigarette manufacturer Juul Labs and a 45% holding in the Canadian cannabis grower Cronos Group. Traded on the NYSE, Altria is a constituent of the S&P 100 and S&P 500 indices.<\/p><\/div><\/div>

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Buy Altria Group shares<\/a><\/p>

\"Image<\/div>

Philip Morris International<\/h4>

Philip Morris International (PMI) was an operating company of Altria until 2008, when it was spun-off. The Swiss-US company sells many of the same brand as Altria, such as Marlboro, but does so outside of America. Whereas Altria has looked outside of the company to diversify and cushion itself from the decline in cigarettes, PMI is focusing on heat-not-burn (HNB) products. Its primary offerings in this category are the devices and cartridges sold under its IQOS brand. Like Altria, PMI is dividend payer, raising its dividend every year since its split in 2008 and currently offering a yield of 5.7%. The stock is listed on both the NYSE and the SIX Swiss Exchange and is a constituent of the S&P 100 and S&P 500 indices.<\/p><\/div><\/div>

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Buy Philip Morris shares<\/a><\/p>

Why invest in tobacco shares?<\/h3>

A true consumer staple and one with a reputation of paying strong dividends to investors, for much of the last century tobacco stocks were very popular with investors. This is because they benefited from an additive, highly-profitable, recession-proof product.<\/p>

However, a greater focus on the ethical side of investing has led to huge swaths of divestments from tobacco stocks. At the same time, amid health concerns and increasing regulations, smoking rates have declined globally. Not only has this led to consolidation within the industry, but it has also created a rethink by the major players.<\/p>

As a result the industry has looked to evolve and focus on so-called next generation products like e-cigarettes and vaporisers. Not only do these create less odour, they are also perceived as being better for your health. At the same time, alongside cigarettes, tobacco companies continue to sell other chewing tobacco, cigars and accessories such as rolling papers.<\/p>

\u201cTobacco stocks have been shunned for a number of years for ESG and health reasons, but should that stop investors?\u201d asks Ben Yearsley, founder and director at Fairview Investing. \u201cThese stocks are on very cheap valuations, create lots of cash and will all be buying their shares back over the next few years as debt levels fall.\u201d<\/p>

He adds: \u201cA shrinking equity base is good for shareholders who want to stay on board because it boosts their earnings per share (EPS). So with tobacco stocks you are getting high yield, good cash conversion and low price\/earnings. The one downside is the health aspect.\u201d<\/p>

How to invest in tobacco stocks<\/h3>
  1. Choose stocks to invest in.<\/strong> You can check out some tobacco stocks above and find out more about them.<\/li>
  2. Choose an investment platform.<\/strong> You\u2019ll need one that lets you invest in the stock exchange that your chosen stocks are listed on.<\/li>
  3. Sign up and fund your account.<\/strong> You might need to wait for your account to be verified and for your funds to hit the account before you can begin.<\/li>
  4. Find your chosen stock.<\/strong> You can search its name or ticker.<\/li>
  5. Review and buy.<\/strong> It\u2019s as easy as that!<\/li><\/ol>

    Compare platforms to buy tobacco stocks<\/h3>
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