In the U.S., tobocco stocks are offering a 6 percent dividend yield, she added, calling it “a good place to be for investors.”
But just as smoking has its risks, so do tobacco stocks. Herzog has market perform ratings on Altria and Lorillard. Both are currently awaiting a decision from the Food and Drug Administration on a panel recommendation that their menthol cigarettes be banned .
“That’s been a bit of an overhang. So I do think there’s a negative risk/reward ratio in terms of owning that stock,” she said. “That’s something we’re more cautious on, heading into that decision. Other than that, the [companies’] fundamentals appear quite strong.”
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Neither Bonnie Hertzog or her company own shares of the tobacco companies mentioned.