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Tobacco stocks have risen into the upper echelon of IBD’s industry rankings as investors seek a safe haven from the market’s gyrations. The eight-stock industry group has jumped 25 places over the past six weeks to No. 15 out of 197 as of Tuesday amid remarkably stable earnings growth, slow-but-steady stock price appreciation and healthy dividend increases. Reynolds American ( RAI ) leads the industry with a best-possible Composite Rating of 99, putting it in the top 1% of all stocks based on five fundamental criteria such as sales and profit growth and relative price strength. The IBD Leaderboard stock has pulled back to just below a 49.66 buy point of a flat base after breaking out Thursday in volume 15% above average. Still, its relative strength line is soaring and its Accumulation/Distribution Rating indicates net positive demand for the shares. Reynolds, which makes cigarettes under brands such as Camel and Pall Mall, boasts a dividend growth rate of 8%. Also, its annualized dividend of $2.26 a share yields 2.9%, which is above the S&P 500 average. Tobacco companies have offset declining cigarette sales by raising prices, cutting costs and developing new products such as electronic cigarettes. Profit at Reynolds rose 17% in the latest quarter, picking up from the prior quarter’s 13% gain. Revenue jumped 41%, accelerating for the third straight quarter following the company’s acquisition last year of Lorillard, whose popular Newport cigarettes helped boost Reynolds’ earnings last quarter. Altria Group ( MO ), the maker of cigarette brands such as Marlboro, reported Thursday that Q4 profit edged up 2% to 67 cents a share on a 1% gain in revenue to $6.32 billion. Both figures trailed Wall Street forecasts. The company reportedly said after its earnings release that it would eliminate 490 jobs in the U.S. in order to save $300 million a year by the end of 2017. Yet Altria has risen 12% in the past year even as the S&P 500 has declined. The stock sits just 1% off a record high as it works on a flat base with a 61.84 buy point. Its relative strength line is soaring, which is a bullish sign. Philip Morris International ( PM ), also boasts a five-year earnings stability factor of 1 on a scale of zero (most stable) to 99 (least stable). Philip Morris is just 1% below an all-time as it hovers under a 90.37 buy point of a flat base. Its long-term dividend growth rate of 11% and annualized dividend yield of just over 4% are highest among the three stocks discussed here. Philip Morris, which was spun off from Altria in 2008, will report Q4 results Feb. 4. Profit for the period is seen falling 21% to 81 cents a share on a 10% decline in revenue to $6.49 billion due in part to the strong dollar. Altria spun off Philip Morris in 2008 to reduce regulatory risk, though the two companies are working together to develop and jointly market e-cigarettes. Image provided by Shutterstock . Scalper1 News
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