Vector Group (NYSE: VGR) and Reynolds American (NYSE:RAI) are both mid-cap consumer staples companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, earnings, analyst recommendations, valuation and profitabiliy.

Valuation and Earnings

This table compares Vector Group and Reynolds American’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Vector Group $1.28 billion 2.18 $291.57 million $0.38 56.61
Reynolds American $12.54 billion 7.44 $6.07 billion $2.31 28.30

Reynolds American has higher revenue and earnings than Vector Group. Reynolds American is trading at a lower price-to-earnings ratio than Vector Group, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

47.0% of Vector Group shares are owned by institutional investors. Comparatively, 46.4% of Reynolds American shares are owned by institutional investors. 12.9% of Vector Group shares are owned by insiders. Comparatively, 0.1% of Reynolds American shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Vector Group and Reynolds American, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Vector Group 0 0 1 0 3.00
Reynolds American 0 8 1 0 2.11

Vector Group currently has a consensus price target of $27.00, indicating a potential upside of 25.35%. Reynolds American has a consensus price target of $58.25, indicating a potential downside of 10.89%. Given Vector Group’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Vector Group is more favorable than Reynolds American.

Dividends

Vector Group pays an annual dividend of $1.60 per share and has a dividend yield of 7.4%. Reynolds American pays an annual dividend of $2.04 per share and has a dividend yield of 3.1%. Vector Group pays out 420.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Reynolds American pays out 88.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Vector Group has raised its dividend for 7 consecutive years. Vector Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Vector Group has a beta of 0.48, suggesting that its stock price is 52% less volatile than the S&P 500. Comparatively, Reynolds American has a beta of 0.44, suggesting that its stock price is 56% less volatile than the S&P 500.

Profitability

This table compares Vector Group and Reynolds American’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Vector Group 2.76% -37.58% 5.84%
Reynolds American 26.45% 14.41% 6.07%

Vector Group Company Profile

Vector Group Ltd. is a holding company. The Company is engaged in the manufacture and sale of cigarettes in the United States through its Liggett Group LLC (Liggett) and Vector Tobacco Inc. (Vector Tobacco) subsidiaries, and the real estate business through its New Valley LLC subsidiary, which is seeking to acquire or invest in additional real estate properties or projects. The Company’s segments include Tobacco, E-Cigarettes and Real Estate. The Tobacco segment consists of the manufacture and sale of cigarettes. The E-Cigarettes segment includes the operations of the Company’s e-cigarette business. The Real Estate segment includes the Company’s investments in New Valley LLC. The Company owns and seeks to acquire investment interests in a range of domestic and international real estate projects through debt and equity investments.

Reynolds American Company Profile

Reynolds American Inc. (RAI) is a holding company. The Company’s segments include RJR Tobacco, which consists of the primary operations of its subsidiary, R. J. Reynolds Tobacco Company; Santa Fe, which consists of the primary operations of its subsidiary, Santa Fe Natural Tobacco Company, Inc., and American Snuff, which consists of the primary operations of its subsidiary, American Snuff Company, LLC. The RJR Tobacco segment manages contract manufacturing of cigarettes and tobacco products through arrangements with British American Tobacco p.l.c. affiliates, and manages the export of tobacco products to certain United States territories, the United States duty-free shops and the United States overseas military bases. The American Snuff segment offers adult tobacco consumers a range of segregated smokeless tobacco products, primarily moist snuff. The Santa Fe segment manufactures and markets super-premium cigarettes and other tobacco products under the NATURAL AMERICAN SPIRIT brand.

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