SOURCE: The Bedford Report

The Bedford Report

February 07, 2011 11:25 ET

Could Philip Morris and Reynolds American's Hefty Dividends Burn Out?

The Bedford Report Provides Analyst Research on Philip Morris & Reynolds American

NEW YORK, NY--(Marketwire - February 7, 2011) - Tobacco companies are experts at weathering adverse conditions. Negative publicity has sent North American tobacco demand down in recent years, however cigarette companies have maintained stable revenues by merely upping the price of cigarettes. Stable revenues have kept profits stable, which has kept the sectors high yielding dividends intact. Even during the recession, while companies from most sectors cut their dividend payments, cigarette manufacturers did not. The Bedford Report examines the outlook for companies in the Cigarette Industry and provides research reports on Philip Morris International, Inc. (NYSE: PM) & Reynolds American, Inc. (NYSE: RAI). Access to the full company reports can be found at:

Last week, Reynolds American reported fourth quarter net income of $309 million, or 53 cents per share. Quarterly earnings were up 43 percent from $215 million, or 37 cents per share, a year ago. The number of cigarettes the company sold fell more than 5 percent year-on-year to 19 billion cigarettes during the quarter, compared with its estimate of a 4.7 percent decline for the whole industry.

Like many industry peers, Reynolds is focusing on cigarette alternatives such as snuff and chewing tobacco for future sales growth as tax increases and smoking bans continue to hinder cigarette sales. In the fourth quarter Reynolds sold 8.2 percent more of its Kodiak and Grizzly smokeless tobacco products.

The Bedford Report releases regular market updates on the Cigarette Industry so investors can stay ahead of the crowd and make the best investment decisions to maximize their returns. Take a few minutes to register with us free at and get exclusive access to our numerous analyst reports and industry newsletters.

In fiscal 2010, Reynolds American raised its dividend payout ratio to 80% of the company's net income compared to 75% earlier. Presently Reynolds pays an annual dividend of 1.96 for a hefty yield of around 6.10 percent.

Reynolds American industry peer, Philip Morris, pays an annual dividend of 2.56 for a yield of 4.40 percent. Philip Morris is scheduled to report quarterly earnings on Thursday.

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