Realistically, electronic cigarettes should be looked upon as a cigarette substitute that present smokers would use. It doesn't contain tobacco and is sold by small businesses and seems to be a great way to quit smoking.
If this is going to have an impact upon long term revenue plans for tobacco companies, it is going to have to replace the "cigarette revenue" of big tobacco.
Replacing Tobacco Cigarettes
In order to see any significant bearing upon the value of the stock, electronic cigarettes are going to have to make a major move to replace tobacco cigarettes. This may be possible, but it is not something that I think is foreseeable in the near future. According to a recent article in Forbes, e- cigarettes are expected to surpass traditional tobacco cigarettes in sales by 2047.
That's a long time away. But if we can picture any long term investment in the tobacco industry, it seems this new technology is going to keep them in business while the companies offer attractive dividends for a long time to come.The companies are taking this seriously, too, as TV commercials are returning as companies like Reynolds America (RAI) start marketing its Vuse e-cigarette. Even though this product is expected to eventually be regulated, it continues to grow at astronomical levels. Next year's growth is expected between 40% and 50% while it should reach a $3 billion-dollar industry by the end of 2015 according to Citi Research Group. Big tobacco companies may remain for years to come. If the electronic cigarette replaces the traditional cigarette and the next 35 years go as predicted, investors are going to continue to enjoy "income investing" in these companies that offer generous dividends year in and year out. At the time of publication the author held no positions in any of the stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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