Paul Gardner, CFA
Rothmans Inc
ROC-T
COMMENT
May 17, 2007
Looked at it a couple of years ago, but what was bothering him where the private-label brands eating into their main brand, so margins have been compressed. A massive free cash flow business. Fantastic dividend.
The tobacco sector is acting particularly well. Very stable cash flows. There are always litigation risks. Should continue well even in a slowing economy.
If they got pounded down really hard, and got under $20 it might be a trade. For the longer haul the demographics are against it. Huge cash flows and have been buying back their stocks.
A great dividend story. Buying back shares. Fantastic cash flow growth. If you're nervous about the market, this is a great company to own. Their private label brands were hurting their premium brands and margins were suffering. They turned that around and cut their costs and increased dividends.
Tobacco is a vile product, is the best business in the world to be in. No business earns returns that tobacco does. Basically a cash machine. 5% yield. Every few years issues a special dividend. This is one you can Buy and Hold.
The best thing with this is that you get the chance of special dividends. It's a cash flow machine and you get a nice fat yield now with a chance of a special dividend every 2 or 3 years.
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