Monday, March 14, 2011

Dividend Machine Universal Tobacco, UVV

Nicotiana tabacum, tobacco, detail of a leaf i...
Nicotiana tabacum, tobacco, detail of a leaf in a field, Dordogne, France. (Photo credit: Wikipedia)
Income investors, before you even begin to learn about UVV,  I know many of you will put this pick in the trash bin right away because it is a tobacco product.

While smoking is bad for your health, tobacco leaf sells at a very nice profit and this company pays you a 4.61% dividend yield.

International sales are the growth engine and one could make an argument for the pressure on United States sales because of the move to a smokeless country.  However, tobacco leaf sales are robust.

I would not expect anyone to buy all the stocks that are profiled as dividend machines. Some of you will throw out this idea immediately and others of you may even like this pick because you want to profit from a well run business no matter how socially unacceptable the product is.

Let’s break it down. UVV makes about $5.37 per share per year.  They have a small amount of debt with a D/E (debt to equity) ratio just .53.  Each year the dividend, which is $1.92 increases.  At the most recent closing price of $41.95 the dividend yield is 4.61%.

This company meets all of our criteria for a dividend machine.  If you can stomach the industry, it is worth a place in your cash flow portfolio.

Very Truly Yours,
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