With rates stuck at ultra-low levels, times are tough for yield-seeking investors. However, some investors says a fiery set of equities offers a compelling opportunity to pick up dividends: Tobacco stocks.
Along with the well-documented health problems that come along with smoking, tobacco companies carry a stigma with the public. Yet the sector, according to Erin Gibbs, equity chief investment officer at S&P Global, is "another little industry that you can get some really sweet yields, about 4.5 percent."
The list of tobacco titans include Altria (MO), Vector Group and Philip Morris International. Altria has seen recent highs not seen since before the financial crisis, and the company offers about a 4 percent dividend yield.
"Tobacco is unique because there are a lot of people who don't invest into it," said Gerry Sullivan, portfolio manager of the Barrier Fund — formerly known as the Vice Fund. The firm focuses particularly on stocks associated with notable "vices," like smoking and drinking.
Tobacco typically "trades with a low beta; it doesn't go up as fast, not down as fast," Sullivan told CNBC in an interview recently.
"But I can't believe the yield is not a key component in an investor's interest in the stock, because if you would ask the majority of people, of what they think of tobacco stocks, they would say smoking is bad," Sullivan said. "But it comes with a tremendous yield statistically."