POPULAR SHARES

Our guide to the stocks that matter

THE tobacco industry is selling fewer cigarettes, as messages about the dangers of smoking have hit home, and vaping has provided an acceptable replacement for some consumers.

However, the success of tobacco companies in the past has been built on cutting costs, while also raising prices, which is made easier by selling an addictive product of course.

That’s certainly been the case at Imperial Brands, which has been able to increase dividends despite falling sales volumes. Indeed, the company expects to raise the payout by 10pc a year in the medium term.

There are risks though. The US regulator is considering banning menthol cigarette sales and certain types of flavoured e-cigarettes. The latter is probably more of a worry for Imperial, which recently launched its Myblu e-cigarette.

Ethical concerns are also rising up the agenda – which could mean fewer investors willing to back tobacco companies – although there isn’t much sign of capital flows being too badly affected as yet.

That aside, Imperial Brands generates lots of cash and debt is falling, so the dividend is well covered for the moment. Shares yield 7.5pc, so they’re an attractive option for income seekers. The generous dividend policy can’t go on forever though.