Just for the dividend or is there another story going on here? Looks like revenue is pretty flat, as are margins, although encouragingly operating cash flow is still growing Y/Y. I just wonder if these guys will still be around in 20 years or if they will just be a shell of their former self.
1. i like the tobacco industry due to its demand characteristics and its repeat customers. having said that, increased draconian US taxes on cigarettes this year (and probably next) will reduce demand but growing e-cigarette consumption should replace at least some of the lost cigarette revenue. foreign markets fortunately are generally lagging the US market when it comes to taxation.
2. i like the 13 year RAI price chart (attachment#1).
it's one of the most consistent out of all the s&p 500 companies. i attribute this to the excellent repeat customers.
3a. i am -not- looking to maximize returns (higher returns implies taking more risk and a bumpier ride). i've got a decent nest egg where conservative investment growth will allow me to hit my retirement goals.
3b. many papers have shown high dividend yield (but not too high!) correlates with higher overall return.
3c. RAI has had consistently high dividend yield for the last 10 years. 5% yield is on the lower end of what they pay out.
3d. 5% dividend yield plus a conservative 2% price appreciation is a 7% total return which is more than sufficient to meet my retirement goals. over the past 13 years total return is much higher than 7% (it's more than double this) so there's decent odds of a surprise on the upside.
3e. i am chasing yield but RAI has a decent record of paying out dividends
4. RAI isn't being held necessarily over a 10, 20 or 30 year period. i watch it until i don't like it, then will sell it. any individual company can die quickly. it's optimistic to say you'll hold any company for 30 years (you may, but i don't see much advantage in making this assumption and there are certainly downsides, like complacency).
it boils down to: i like their relatively stable price appreciation, i like their consistent dividend. price + dividend directly affects total return. i like tobacco customers which provide consistent demand. tobacco taxation/regulation is probably the biggest concern, there are several proposals to heavily increase taxes on e-cigarettes as well as regulations that have passed to increase taxes on traditional cigarettes (i will note taxes have increased steadily over the last decade, but share price keeps rising).
i'm fairly concerned about increased taxes on dividends (since RAI dividends is a very large part of total return).
just waiting for the mafia bump up and sell it all.
