In a market that is turbulent and volatile, investors are seeking companies that will supply them with a relatively reliable return. Tobacco stocks in general are considered defensive compared to other sectors because sales are more consistent and generate a lot of cash for companies. Based on that, this week’s share of the week is international tobacco giant, Imperial Brands.

The group manufactures, markets, and sells a range of cigarettes, e-cigarettes, tobaccos, rolling papers and cigars in 160 countries. Its brands include Davidoff, Gauloises, Gitanes and Golden Virginia. Imperial Brands has a very impressive record of raising its dividend by an average of 10% for at least the last ten years, and growth is forecast to be well above inflation for at least the next three years. Investors should appreciate that the prospective dividend yield of 4.4% is the best in the sector.

e-cigarettes

Cost-cutting remains a major focus for the group and investors should be aware that e-cigarettes are seen as having excellent growth prospects at present. The group’s blu brand products are gaining traction in the UK and there are plans to boost sales in the US.

We recommend Imperial Brands as a ‘buy’ for medium risk income-seeking investors due to the very healthy dividend, excellent track record of dividend growth, the growing success of alternative products such as e-cigarettes and the possible revenue boost from improving US-Cuba trade relations.