The Vector Group Ltd. (VGR) is one of my favorite stocks but most don’t seem to appreciate it like I do.
You see Vector Group is one of those hated Tobacco companies. No, I don’t smoke, but this being a free country and somewhat of a free world I believe people have the God given right to enjoy their short time here on earth as they please as long as they do not harm others or infringe on others rights to pursue their own happiness. In other words I prefer to live and let live. I know very well that many of you will disagree with me and that’s okay but I doubt you will ever change my mind. I know, smoking is horrible and yes it kills people but so do a multitude of other things. In fact I am willing to bet that most of the people that hate tobacco stocks have a least a couple of vices of their own. Anyway I believe I have made my point so I will not pursue this any longer.
There are also some that believe it is a dying industry and I can’t argue much there. Certainly as people become more educated as to the adverse effects of tobacco smokers are on the decline. Let’s have a look at what Vector is all about as a company.
Vector Group is the fourth largest Tobacco Company in America. It was founded in 1873 , one hundred and forty four years ago! It’s brands are Pyramid, Grand Prix, Liggett Select, Eagle 20’s and Eve. It’s brands are considered the discount brands in the tobacco industry. Last year its tobacco products had earnings (EBITDA) – ( Earnings before taxes) of just under $270 Million dollars.
What many people don’t realize though is that Vector Group also engages in the Real Estate business. It’s Real Estate business is called New Valley. New valley owns a broad range of real estate properties and owns over 70% of Douglas Elliman Realty. It is the largest residential real estate brokerage firm in New York city and is the fourth largest firm in the United States with 90 offices and over 6000 agents. It also through its alliance with Knight Frank, has a network of over 400 offices in 55 countries with over 22,000 real estate agents. In addition it is also involved in property management services, title and settlement services and relocation services.
If you Invested $100 in 2005 your return would be:
- S&P 500 – $ 240.1
- S&P Midcap – $276.0
- Vector Group (VGR) -$ 558.6 !
Source : VGR Investor Relations
Okay, so now for the good part ! The investor stuff !
Vector group has a relatively high Dividend yield, usually well over 7%, and for most that would be sufficient but in addition to its great yield it also pays a “Stock Dividend” of 5% which means that if you own 1000 shares you receive an additional 50 shares of VGR stock !
There has been many articles as to why VGR cannot sustain their Dividend but it has managed to do so since 1995. Have a look for yourself at it’s Dividend History!
Now of course history is not indicative of future performance or results but as you can see the history is great.
Is it a little risky ? Compared to many stocks yes but compare to most – no. The rewards can be great for those that dare. I have owned this stock for two years now and continue to add on dips. It is one of my largest holdings. I look forward to receiving the dividends each quarter and I have a special glimmer in my eyes come September each year looking for those stock dividends which helps to increase my share count even more!
Looking for more stocks like this one ? Then you may want to check out Southside Bancshares
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