Currently, the tobacco industry is in decline because cigarette consumption decreases by around 3% annually. The main reason for that is a growing awareness of the harmful health effects of smoking cigarettes. As a result, total cigarette consumption has continued on a 13-year downward trend. That is why the market for e-cigarettes might be considered the next growth play for the cigarette producers as the chart below suggests.
The Best Electronic Cigarette InvestmentsCigarette stocks are among the best "sin" stocks and have dramatically outperformed the market the past 10 years.
Besides Altria, which is a favorite atMoney Morning and is included in theMoney Map Report portfolio, here are three other e-cigarette stocks investors should consider:
Reynolds American Inc. (NYSE: RAI):The second-largest tobacco company, Reynolds produces Camel, Doral and Winston products, accounting for 25% of U.S. tobacco sales. In 2006, it purchased Conwood, the second-biggest smokeless tobacco company in the United States, and had a limited launch of its e-cig Vuse last year. In 2013, Reynolds expects to sell Vuse nationwide and is getting ready to launch e-cigs with a heat source at the tip that heats rather than burns tobacco. (Reynolds introduced a similar e-cig, Eclipse, in 1996 and still sells it to wholesalers and retailers upon request.) Like Altria, RAI offers a healthy dividend just under 5% and is up 572% in the past 10 years.
Lorillard Inc. (NYSE: LO): The maker of Newport cigarettes, Lorillard is the third-biggest U.S. tobacco company and the oldest (founded in 1760). Newport accounted for 88% of Lorillard's sales in 2011, and to diversify in 2012, it acquired electronic-cigarette maker blu eCigs for $135 million. Blu eCigs had 2013 first-quarter sales of $57 million, up from $39 million only one quarter ago. LO offers a 5.1% dividend and has returned almost 605% the past 10 years.
Vapor Corp. (OTC: VPCO): Unlike the other companies, this is a direct play on e-cigs. In fact, Vapor Corp. is the only fully reporting, publicly traded electronic cigarette company in the U.S. But compared with the above stocks, it's definitely the riskiest of these investments. Vapor Corp. designs, markets and distributes e-cigs under the Fifty-One, Krave, VaporX, EZ Smoker, Green Puffer, Americig, Fumre Hookah Stix and Smoke Star brands and is a possible takeover target for big tobacco firms. For 2012, it reported record net sales of $21.4 million, an increase of 33.6% year-over-year. In early January, VPCO tripled from 25 cents to 75 cents and has since sold down to 40 cents.