Up to date on October seventeenth, 2025 by Bob Ciura
As a enterprise proprietor, promoting merchandise which have excessive revenue margins together with robust model consciousness and an exceptionally loyal buyer base is strongly fascinating.
This enables for predictable income and excessive ranges of income over time.
The tobacco trade suits this mannequin, regardless of declines over time within the variety of prospects that use its merchandise.
Tobacco shares are significantly enticing to earnings buyers due to their beneficiant dividends and defensive traits throughout financial downturns.
Tobacco shares produce lots of money circulate, however have little or no capital expenditure wants, creating what may very well be thought of excellent earnings shares.
You possibly can obtain a spreadsheet with all our tobacco shares (together with essential monetary metrics reminiscent of dividend yields and price-to-earnings ratios) utilizing the hyperlink under:
Tobacco shares are extensively prized by earnings buyers due to their excessive dividend yields, secure payouts and dividend enhance streaks. Nonetheless, declining buyer counts and utilization charges are weighing on the group.
This text will analyze the prospects of 5 of the most important tobacco shares that we cowl within the Certain Evaluation Analysis Database.
Rankings are so as of projected whole returns from lowest to highest.
Desk of Contents
You possibly can immediately bounce to any particular person inventory evaluation by clicking on the hyperlinks under:
However first, we’ll check out the tobacco trade’s major concern, which is declining tobacco utilization.
Trade Overview: Declining Smoking Charges
The % of the U.S. inhabitants that smokes is in a steady decline, and has been for many years.
Supply: American Lung Affiliation
The % of the U.S. smoking grownup inhabitants has steadily declined from 42% in 1965, to only 11.6% as of 2021. The declines among the many youth inhabitants have been even larger.
Younger folks now have a smoking fee of about one in 25. This type of decline in an trade’s buyer group typically spells hassle for the businesses that function inside it.
Different types of tobacco utilization have seen comparable charges of decline, together with smokeless tobacco. This has been the case with each demographic group, so it’s widespread amongst the entire corporations’ potential prospects.
Not solely are fewer folks smoking, however the ones that do are smoking lower than they used to.
Supply: American Lung Affiliation
The variety of folks smoking at the least 15 cigarettes a day has plummeted prior to now few a long time. As we speak, the overwhelming majority of people who smoke use fewer than 15 cigarettes day by day.
In different phrases, there are fewer prospects for the trade. And, those that stay are utilizing fewer merchandise. This has negatively impacted demand from two instructions.
This has led to a lot decrease volumes of whole cigarettes offered, producing a declining whole to be cut up up among the many varied corporations promoting cigarettes.
An rising variety of U.S. states have considerably raised the tax on cigarettes to cut back their finances deficits, and to cut back the potential enchantment of smoking for shoppers.
Given the propensity of localities to make use of tax will increase on cigarettes, the scenario will possible solely worsen for tobacco shares.
As well as, pricing will increase have the affect of lowering utilization additional. Demand will virtually definitely proceed to say no as taxes and costs rise.
Certainly, well being organizations just like the American Lung Affiliation actively encourage localities to boost taxes on cigarettes and different tobacco merchandise to discourage utilization.
To make issues worse for tobacco corporations, a lot of the world’s smoking inhabitants fee seems to be a lot the identical because the above chart. It has turn into abundantly clear that buyers world wide are eschewing tobacco merchandise for well being considerations.
These unfavourable traits have stored many buyers away from tobacco shares. Nonetheless, tobacco shares can nonetheless generate stable whole returns provided that they have an inclination to supply excessive dividend yields.
The important thing behind an funding in tobacco shares is the inelastic demand for cigarettes relative to their worth because of the addictive nature of those merchandise.
Tobacco corporations have been in a position to elevate their costs to assist offset declining smoking charges. In consequence, they’ve distinctive development information.
As well as, inhabitants development partly offsets the impact of the declining % of people who smoke.
Nonetheless, buyers should remember the fact that the whole volumes for the trade are in pretty steep decline, and all indications are that that is irreversible.
Tobacco Inventory #5: Imperial Manufacturers plc (IMBBY)
5-year anticipated returns: 1.7%
Imperial Manufacturers is a tobacco firm that was based in 1901. As we speak, it’s headquartered in the UK. The corporate manufactures and sells a wide range of tobacco merchandise, together with cigarettes, tobaccos, cigars, rolling papers, and tubes.
A few of its core manufacturers embrace Winston, Davidoff, Gauloises, L&B, Bastos, Effective, Gitanes, Kool, Jade, and lots of extra.
The corporate is organized into two working segments, tobacco and logistics. The tobacco section consists of the manufacture and sale of its varied tobacco merchandise, whereas the logistics section distributes tobacco to product producers.
On Might 14th, 2025, Imperial Manufacturers reported outcomes for the primary half of fiscal yr 2025. For the interval, internet income declined 3.1% on a reported foundation. Income for tobacco and subsequent technology merchandise have been up 3.2% as pricing and blend added 5.9% to outcomes, offset by a 3.2% decline in quantity.
Whole tobacco market share improved in three out of 5 high markets. Enhancements within the U.S. (+10 foundation factors), Germany (+65 foundation factors), and Australia (+5) was partially offset by the U.Okay. (-70 foundation factors) and Spain (-90 foundation factors).
Imperial Manufacturers reaffirmed its prior steering for fiscal yr 2025, with income nonetheless projected to develop by low single-digits.
Click on right here to obtain our most up-to-date Certain Evaluation report on IMBBY (preview of web page 1 of three proven under):
Tobacco Inventory #4: British American Tobacco (BTI)
5-year anticipated returns: 2.8%
British American Tobacco is likely one of the largest tobacco corporations on this planet. It owns the next tobacco manufacturers, amongst others: Kool, Benson & Hedges, Dunhill, Kent, and Fortunate Strike.
British American Tobacco reported its half-year earnings leads to August. The corporate noticed its revenues increase by 1.8% in fixed currencies, however resulting from foreign money fee headwinds, reported revenues have been down by 2.2% for the interval.
British American Tobacco’s New Classes companies grew somewhat quicker than the remainder of the corporate, gaining share versus the corporate’s general revenues. Administration believes that development will accelerated through the second half of the yr because of the roll-out of recent merchandise within the firm’s New Classes/smokeless companies.
British American Tobacco earned 162 pence through the first half of the yr on an adjusted foundation, which is the same as US$2.20. At fixed foreign money charges, this quantity was up by 2% versus one yr earlier.
Natural development resulting from rising cigarette costs and the rise of vaping merchandise must be constructive for revenues, and declining curiosity bills resulting from debt paydown may affect profitability as properly. On high of that, British American Tobacco plans to purchase again its personal shares sooner or later which may have a constructive affect on earnings-per-share as properly.
Click on right here to obtain our most up-to-date Certain Evaluation report on BTI (preview of web page 1 of three proven under):
Tobacco Inventory #3: Altria Group (MO)
5-year anticipated returns: 5.0%
Altria is a tobacco inventory that sells cigarettes, chewing tobacco, cigars, e-cigarettes, and extra underneath a wide range of manufacturers, together with Marlboro, Skoal, and Copenhagen, amongst others.
It is a interval of transition for Altria. The decline within the U.S. smoking fee continues. In response, Altria has invested closely in new merchandise that enchantment to altering client preferences, because the smoke-free class continues to develop.
The corporate additionally has a 35% funding stake in e-cigarette maker JUUL, and a forty five% stake within the Canadian hashish producer Cronos Group (CRON).
On July 30, 2025, Altria Group, Inc. reported its monetary outcomes for the second quarter of 2025. The corporate posted adjusted earnings per share of $1.44, surpassing the analyst estimate of $1.38 and rising 8.3% yr over yr.
Income got here in at $6.1 billion, above the consensus estimate of $5.2 billion however down 1.7% in comparison with the identical interval final yr. Web revenues have been $6,102 million, with gross revenue at $3,900 million and working earnings at $3,200 million.
Web earnings stood at $2.4 billion, down from $3.8 billion in Q2 2024, impacted by a major goodwill impairment within the e-vapor section.
Home cigarette volumes declined 10.2%, however the smokeable merchandise section delivered stable adjusted working corporations earnings development behind Marlboro’s power.
Click on right here to obtain our most up-to-date Certain Evaluation report on Altria (preview of web page 1 of three proven under):
Tobacco Inventory #2: Common Company (UVV)
5-year anticipated returns: 8.5%
Common Company is a market chief in supplying leaf tobacco and different plant-based inputs to client product producers.
The Tobacco Operations section buys and sells tobacco used to make cigarettes, cigars, pipe tobacco, and smokeless merchandise. Common buys tobacco from its suppliers, processes it, and sells it to massive tobacco corporations within the US and internationally.
The Ingredient Operations deal primarily with greens and fruits however is considerably smaller than the tobacco operations.
Common Company reported its first quarter earnings leads to August. The corporate generated revenues of $594 million through the quarter, which was significantly lower than the revenues that Common Company generated through the earlier interval. Revenues have been additionally down on a year-over-year foundation.
This was a weaker efficiency in comparison with the vast majority of the final couple of quarters, when Common was in a position to develop its revenues on a year-over-year foundation.
Fiscal 2025 was a yr throughout which the corporate grew its revenues by 7%. Common’s adjusted earnings-per-share totaled $0.38 through the quarter, which was approach weaker than the outcomes seen within the earlier quarter, when Common generated a considerably bigger revenue.
In all of fiscal 2025, Common Company noticed its earnings-per-share pull again by near 10%.
Click on right here to obtain our most up-to-date Certain Evaluation report on UVV (preview of web page 1 of three proven under):
Tobacco Inventory #1: Philip Morris Worldwide (PM)
5-year anticipated returns: 10.7%
Philip Morris Worldwide was spun off from Altria in 2008, and is charged with the manufacturing and distribution of Altria’s merchandise outdoors of the USA. This distribution consists of the Marlboro model.
On July twenty second, 2025, Philip Morris shared its Q2 outcomes for the interval ending June thirtieth, 2025. For the interval, the corporate posted internet revenues of $10.1 billion, up 7.1% year-over-year. Adjusted EPS was $1.91, up 20.1% in comparison with final yr.
In fixed foreign money, adjusted EPS grew by 18.9%. Whole cargo volumes have been up 1.2% collectively, pushed by power in smoke-free classes.
Notably, combustibles continued to point out resilience, with volumes declining simply 1.5%. Particularly, cargo volumes in cigarettes, heated tobacco, and oral merchandise modified -1.5%, 9.2%, and 26.5%, respectively.
Worth will increase, particularly in combustibles, additionally performed a key position in driving income.
The worldwide enlargement of IQOS, together with the ILUMA mannequin, has improved internet earnings and enhanced margin combine. Additionally, the acquisition of Swedish Match in 2022 has been accretive to EPS, with Zyn nicotine pouches driving distinctive income development and accelerating PMI’s transition to smoke-free merchandise.
As a consequence of robust money technology, low capex necessities and the soundness of Philip Morris’ enterprise mannequin throughout recessions the dividend stays comparatively well-covered.
Click on right here to obtain our most up-to-date Certain Evaluation report on Philip Morris Worldwide (PM) (preview of web page 1 of three proven under):
Ultimate Ideas
Tobacco shares as a gaggle have had a troublesome time prior to now couple of years. Regulatory and client choice modifications proceed to plague the group.
However valuations are comparatively low, dividend yields are excessive, and most corporations are diversifying away from tobacco.
We see PM, UVV, and MO at present providing the very best anticipated whole returns. And, all provide sizable dividend yields.
Dividend sustainability varies by inventory on this group, however general, there’s a lot for earnings buyers to love in the case of these 5 tobacco shares.
Additional Studying
In case you are serious about discovering high-quality dividend development shares appropriate for long-term funding, the next Certain Dividend databases can be helpful:
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