As the smokeless tobacco industry continues to see steady growth, investors are looking to get in on the most priming companies that provide this as part of their lineup. This product, in particular, is a moist powder tobacco product similar to snuff but with minimized risks to your health. It has been rising in popularity worldwide as a less harmful alternative to cigarettes, but for people who still enjoy the flavor and aroma. This post will examine the top choices to invest your money into, as well as a few pointers on evaluating the type of company you might want to add to your investment portfolio. For investors seeking exposure to the burgeoning smokeless sector, these companies present a compelling opportunity to get in before they really take off.
British American Tobacco
The first option on this list is the behemoth that is British American Tobacco (LSE: BAT, NYSE: BTI). It starts off this list for a few crucial reasons. Firstly, it sells snus via its Fiedler & Lundgren business located throughout Sweden and Norway. Secondly, it offers a whopping 8.71% dividend yield (as of the current date), and finally, it's on offer right now for investors who want both capital gain and regular income from dividends. Moreover, BAT has been investing heavily in its "reduced-risk products" and is on track to see this segment overtake its traditional smoke-based offerings in the coming decade.
Altria Group Inc
Another exciting tobacco company investing heavily in its lower-risk products is Altria Group (NYSE: MO). Moreover, just like BAT, they offer a considerable dividend yield that increases in value and pays out regularly. The main difference is that MO seems to be correctly priced, meaning you might not see as much gain as possible with BAT. Nonetheless, this fact is somewhat tampered with by the fact that its smokeless products range is surging ahead of its competitors and has a far more expedited route to profitability.
Philip Morris International, Inc
The final option to consider is Philip Morris International (NYSE: PM). They are the most expensive option compared with the others, but they also have an intriguing smokeless and cape range that is currently very profitable for them. They also have a dedicated SHIRO-branded range of nicotine pouches that they are using to target younger smokers seeking to quit smoking but still enjoy a nicotine hit.
Things To Consider When Investing
While all the businesses mentioned are highly profitable and have long-term plans, sometimes way out 20 years into the future, you should never invest blindly without knowing the facts.
What Goes Up Can Also Go Down
Investing is a risky game, even when you're dealing with relatively safe and well-established brands. For example, if you invested in BAT less than a year ago, you will currently be sitting on an almost 14% loss to date. Nevertheless, the high dividend yield often makes up for this, and when combined with a dividend reinvestment program (DRIP), you can often recipe for some of this downturn.
The Tobacco Industry Has Past Its Prime
Don't let that heading fool you into thinking they are bad investments… they are anything but. However, don't expect to see wild Tesla-like swings in value anytime soon. Nonetheless, you can still find profit when you dig into the details. For example, BAT has a significant stake in India's largest tobacco company, ITC, giving it unique access to one of the world's largest smoking populations. This also presents the opportunity to offer its smokeless products as Indians slowly begin to wean themselves off conventional smoking.
Most financial influencers will have you believe that all it takes to get rich quickly is to find an elusive 100-bagger. While this is possible for very savvy investors (who live and breathe this world), most will only ever see such fortune through disciplined investing and a long-term outlook. This is especially pertinent for traditional tobacco stocks, as their value tends to come from reinventing dividends over the course of 20 to 30 years and reaping the income when you retire.
Fundamentals Are What Make You Money
Fundamental analysis is the bedrock upon which you will build your investment thesis, and without which, you are simply firing in the dark. This type of analysis will tell you how profitable a business is, how much debt it has, and whether management has a clear vision for the future. It will also give you a relatively good indication of fair value and the price you might want to go in at (although fair value might be more relevant for stocks with a more explosive growth trajectory).
Investing in these kinds of companies can provide investors with a steady stream of income over the years. However, you need to make sure you know what you're getting into and how robust their smokeless future plans are if you are to make a wise decision.