Wednesday, June 27, 2012

Lorillard Inc (LO) 2012 Review

Lorillard Inc (LO)produces and Newport, Kent, True, Maverick and Old Gold cigarettes.

The company has grown profits per share from $5.15 in 2008 to $7.78 in 2011 and dividends per share from $1.84 in 2008 to $5.20 in 2011, earning a 100% return on equity. Despite the recent global recession, LO should continue to produce above average returns as result of:

(1) increasing market share,

(2) the strength of its Newport brand enables it to raise prices,

(3) geographic expansion,

(4) a stock buy back program.


(1) governments around the world are imposing restrictions on tobacco use,

(2) a highly competitive industry,

(3) the industry is not allow to advertise.

Lorillard is rated A by Value Line, has a 600% debt to equity ratio but is working hard to reduce this figure. Its stock yields 4.6%

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
LO 4.6% 25% 70% 3
IND 1.3 12* 25 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
LO 600% NA 0 20% A
IND 64 48 NA 15 NA


Note: LO stock made great progress off its March 2009 low, quickly surpassing the downtrend off its December 2007 high (red line) and the November 2008 trading high (green line). The stock is in a long term uptrend (straight blue lines). Intermediate term, it is an uptrend (purple lines). The wiggly blue line is on balance volume. The High Yield Portfolio does not own LO. The upper boundary of its Buy Value Range is $112; the lower boundary of its Sell Half Range in $171.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.