Several of my subscribers have inquired about my approach to finding premium, high yield tobacco stocks. In this article, I'll demonstrate precisely how I achieve this.

While there are various tools available, for this example, I utilized the Quant Investing stock screener, the very tool I rely on to invest my own funds.

Selecting the sector

I began by picking the industry sector, specifically Tobacco, in order to compile a list of companies.

You have the flexibility to choose one or multiple sectors based on the specific type of companies you are interested in.

Choosing the output columns

Given my desire for high yield prospects, I opted for the following output columns:

• Shareholder Yield – Far superior to Dividend Yield when seeking high yield prospects
• FCF Yield – To assess the sustainability of the high yield over time
• Dividend Yield – To determine the amount of immediate cash returns
• Country – Vital for understanding withholding tax liabilities. For example, the UK and Hong Kong impose no withholding taxes.

(Shareholder Yield is also the ratio utilized to generate ideas for the Shareholder Yield Letter)

Screening output

This is how the output appears, sorted based on Shareholder Yield:

Source: Quant Investing stock screener

Here are a few observations from the list:

• The most lucrative company is based in South Korea. Despite paying only a 6% dividend, it repurchased more than 6% of its outstanding shares, resulting in a Shareholder Yield of over 12%.
• British American Tobacco showcases an enticing Dividend Yield of over 8%. It seems to be sustainable and may even be increased, as its FCF Yield exceeds 9%!
• Altria’s FCF Yield is lower than its Dividend Yield, indicating that it may need to take on debt to cover a portion of its dividend. A trend that could develop into a concern if it persists.
• Imperial's substantial FCF Yield is appealing, even if its dividend yield is lower, signifying the potential for a dividend increase. Most likely, the company is utilizing the cash to repay debt.
• Universal Corporation's appeal is limited as its dividend isn’t supported by cash generation.
• Philip Morris’ FCF is not available, indicating that the Cash Flow Statement hasn't been published or updated yet (this is common with quarterly reports). In such instances, you can check back in a week or more, and the ratio will likely have been updated.

It's as straightforward as that

This is a simple demonstration of how to identify exceptional high yield prospects. Hopefully, you found it useful.

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