Wednesday share tips: Imperial Tobacco, Associated British Foods

5th Nov 2014 09:19

Assuming that you have no qualms about holding tobacco shares then companies in the space continue to be among the best dividend payers out there. Imperial Tobacco is one of these firms. Yes, its market is in long-term decline, even in emerging markets, where there is a growing trade in illicit fags. However, the company has begun a £300m cost savings programme which is due to be completed by 2018. That meant that while annual revenue was off by 6% in its last financial year, as per yesterday's numbers, operating profits still improved by 5% to £2.06bn, which in turn made way for a 10% rise in its dividend pay-out, to 128.1p.It is also bent on grabbing market share for premium brands towards which it can shift its consumers. Hence, come spring it will purchase a rack of brands such as Winston, Maverick and Salem, in the United States. Further buttressing the investment case, the recent market float of a stake in its non-core logistics operation Logista brought debt down by £1bn to £8.1bn. "Hold", says The Times's Tempus.Associated British Foods is the conglomerate that keeps on giving, for now at least. The company achieved a 17.5% increase in its full-year pre-tax profits to reach £1.02bn, thanks to its Primark fashion unit. More impressive, net cash from operations rocketed by £163m to hit £1.44bn. Hence, and despite the company's recent expansion across southern Europe and in the UK, it still managed to easily pay investors £256m in dividends.In parallel, net debt dropped by £352m versus the prior year period to stand at £446m. With net debt at only 7% of shareholders' equity the balance sheet has been left looking fairly solid. Despite all of the above, the group continues to be heavily reliant on its Primark unit. Given that about 60% of its store portfolio is in the UK, how long can the British consumer carry growth? asks The Daily Telegraph's Questor column. "Sell," says Questor.