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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: 249443 who wrote (16510)	2/26/2003 7:38:45 PM
From: jeffbas	Respond to of 78998

I think that is a smart view. There are an awful lot of investors in asbestos-related companies that only got the current dividend income, and nothing else. If MO is like an oil well where the income will cease after some unknown period of time and there be nothing left, the current dividend yield is WAY too low. In my opinion, there is perhaps a 50% risk of this happening some day. Therefore, that suggests that the current yield on MO should be an equal composite of a more modest dividend yield on such a stock without that risk and an "oil well" approach return. The result would be a higher yield than now, with the market's actual pricing assuming perhaps a 25% risk of a disaster.

To: 249443 who wrote (16510)	3/1/2003 9:18:15 PM
From: Demetre Deliyanakis	Read Replies (3) \| Respond to of 78998

MO The lawsuit issue has been around for at least a decade. MO has a mixed track record on the lawsuits. The Engle case in Florida will probably be overturned on appeals. The states have to be careful about raising cigarette taxes. Eventually, they will create a huge black market, so people will smuggle in Marlboro's from lower taxed states to higher taxed ones. I could see MO shipping cigarettes to Canada or Mexico, and have the natives smuggle it back across the Canadian border, or Mexicans smuggle it back through Texas or California. The settlement with the states in 1997, provides the states with cash payments from the tobacco companies partially based on cigarette consumption.If tobacco use declines,MO's payments to the states drops. Also, some cities and states have sold tobacco bonds to raise cash. The bonds are secured by tobacco payments. It is impossible to sell the bonds, if tobacco use continues to decline. MO had pricing power issues in 1993, and decided to slash prices on the Marlboro. Eventually, they regained market share, and the stock appreciated. Most of MO's value is in KFT and SAB. I love the dividend. Demetre