Broker lights up growth at Britain’s tobacco firms

THE market can be fickle – particularly, it seems, when it comes to the sin stocks. Take Imperial Brands. On Wednesday, nobody wanted to know, even after an upbeat trading statement. Yesterday, punters were happy to get involved.

The reason? A glowing broker circular from Citi in which it upgraded both Imperial (up 2.3pc, or 59p, at 2619p) and rival British

American Tobacco (up 2pc, or 62p, at 3152p) to ‘Buy’ status.

Analyst Adam Spielman and his team reckon the regulatory dark clouds over the sector are starting to dissipate, as are worries over the debt these groups carry.

More to the point, Citi is bullish on the prospects for ‘next generation products’, or NGPs. That’s vape and tobacco heating products to you and me.

‘The shares could still rise a long way because we think the environment will continue to look less threatening,’ the American bank told its clients.

‘We expect organic growth will pick up this year as NGP sales accelerate and we think the regulatory threat will probably move away from cigarettes.’

The FTSE 100 appeared to shrug off the Westminster pantomime to close 0.6pc, or 40.14 points higher, at 7234.33. The big overseas earners led the charge as the pound receded against a basket of international currencies.

One of the major attractions of the Footsie currently is a prospective yield of 4.7pc, which is streets ahead of the most generous savings account. This year top-flight companies are expected to pay out a record £92bn in regular dividend payments.

And, if 2019 follows the trend of last year, investors can then expect a little extra on top of that figure. For, in 2018, the UK’s top companies handed back around £6bn in special dividends.

BHP (up 1.2pc, or 22.2p at 1818p) has kicked things off with a 79.5p a share distribution. And while these ‘ specials’ are, by their nature, one- offs, a number of blue-chips are gaining a reputation for passing on additional cash generated by the business.

Insurers Admiral (up 0.7pc, or 15p, at 2152p) and Direct Line (up 0.1pc, or 0.5p, at 352.9p) are on that list, as are builders Barratt (down 2.8pc, or 17.2p, at 593.6p),

Taylor Wimpey (down 0.4pc, or 0.65p, at 178.15p) and Berkeley (down 0.8pc, or 29p, at 3759p).

But there was a warning from stocks guru Russ Mould, of the investment group AJ Bell. He said there was some scepticism over the ‘durability’ of cash returns made by the housebuilders, which are underpinned by the generous Government incentive scheme Help To Buy.

‘It could also be the case that a special dividend is not designed to be a return of excess cash, which management does not immediately require, but an attempt to curry favour with disgruntled shareholders,’ Mould said. It wasn’t the best of starts for

Ferro-Alloy, Kazakhstan-focused vanadium producer, which made its London Stock Exchange debut yesterday. Shares were placed at 70p each with investors, helping to raise £5.2m of new funds. They ended the day at 56.5p.

Delving into the small- caps, music download platform 7digital hit the right note with investors, rising 12.2pc, or 0.12p, to 1.15p after inking partnership agreements with connected device firm Access and copyright technology group Dubset. And, finally, leak-detection firm

Water Intelligence surged up 5pc, or 14p, to 295p after it ‘re-acquired’ its franchise in Orlando, Florida – an area it is targeting for accelerated business growth.