Philip Morris International (PM)

World’s largest, most successful tobacco company. Great free cash flow business. Undervalued. Yield of 3.58%.

For those who have no ethical concerns, tobacco stocks are great. From a practical point of view, concerns about litigation risks means that the valuations are very, very low. Low valuations coupled with high dividends, attached to the emerging markets, have worked very, very well. His preference would be British-American Tobacco (BTI-N).

Philip Morris (PM-N) or Anheuser Busch (BUD-N)? If he were picking a sin stock, hands-down it would be tobacco. Because of potential litigation liability attached to it, they are relatively cheap stocks with big, fat dividends. Very tied into the Vietnamese and Indonesian markets and are going to be a big growth story going forward.

Likes this but doesn’t own at this point because he has rotated out of defensive names and into more cyclicals. Long-term this is great. Good yield of 3.8%.

Tobacco companies have pulled back from their highs. They have very good pricing power as well as great free cash flow. Pay good dividends. You have to weigh these things against regulatory risks, etc. Cheap.

Tobacco is growing modestly. It has always paid a great dividend. Smoking is more ubiquitous internationally. Nothing wrong with it from a dividend point of view.

International tobacco. Consumption is at least steady and is moving up. Company just raised its dividend 10%. With a yield of 3.77%, it is not bad. Very solid defensive name. Low beta of about .7-.75.

(A Top Pick June 22/11. Up 42.87%.) 3.3% dividend yield with a projected growth rate of 11% average over the next 3 years. An international operation that has a 10% annual growth rate.