Altria Group Inc (MO), Reynolds American Inc (RAI): This Industry Means Big Yields!

3.) The third largest U.S. tobacco company is Lorillard Inc. (NYSE:LO), with brands that include Newport (the second highest seller to Marlboro), Kent, and Maverick. Lorillard is projected to have the best forward growth rate of the American companies (9%), and also trades at the cheapest valuation at just 13 times forward earnings. They also pay the best yield at 5.6%, and have raised the payout by over 200% in the past decade alone.

So What To Do?

Which particular company is best for your portfolio depends on what your particular goals are and what level of risk you are comfortable with. The smaller companies generally are the best bargains, but are generally more volatile when the market goes sour. In the tobacco industry specifically, smaller companies are more susceptible to lawsuits. A $1 billion lawsuit will affect Altria Group Inc. (NYSE:MO) and Lorillard (whose sales are about one-fifth as much) in very different ways!

Personally, I tend to focus more towards growth than income, being that I’m still a long way from retirement age. As a result, I prefer Phillip Morris International because I think that with the two most populated countries on Earth as untapped markets, even the 12% projected growth strikes me as a little low.

Whichever is best for you, invest without emotion. While a lot of investors view an investment in big tobacco as profiting from the pain of others, I prefer to think of their high returns as a “refund” of some of the money they made from me during my 20’s!

The article This Industry Means Big Yields! originally appeared on Fool.com and is written by Matthew Frankel.

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