Smart investing in times of economic turmoil usually means seeking out companies with indispensible products. There may be no more indispensible a product than an addictive one.

Cigarette companies have long terrified some investors due to the potential for lawsuit losses and general-public backlash, but

Vector Group

(VGR) - Get Report

has too much upside to ignore.

Vector produces an array of discount cigarette brands as well as a new line of snus, a smokeless tobacco product, and, most interestingly, Quest, a new brand of genetically engineered low-nicotine and nicotine-free cigarettes to aid in the cessation of smoking. Vector has also diversified into real estate, with a wholly owned subsidiary, New Valley, and into alcohol, with a recent private placement of $4 million into Castle Brands, a premium spirits producer.

Quest is an ace in the hole for Vector. Currently, low-no nicotine options are only available in a handful of states, New York and New Jersey among them. Expansion into the South and Midwest could represent a huge opportunity. This could add substantial revenue as well as hedge against the anti-smoking push in America. Even assuming only minimal growth in other Vector brands' market share, Vector could grow substantially if Quest can gain a foothold in the smoking-cessation market. Also, other Vector brands have more than just minimal growth potential.

Brand loyalty is a difficult hurdle to overcome for cigarette manufacturers. Price, however, may start to necessitate a switch, which could create a windfall for Vector. We have already seen this start to happen in other products during the downturn. Customers are quickly abandoning their beloved but pricey Starbucks coffee for inexpensive home-brewed alternatives. Many smokers may follow suit and start to trade in their Marlboros, Camels and Winstons for Liggetts, Grand Prix and Pyramids.

There is a simpler reason to buy this stock: the current dividend yield is more than 10%. Some may be skeptical of such a high dividend payout, believing it's not sustainable. A quick review of financial statements, however, would seem to suggest that it is. In the most recent quarter, Vector had 7% revenue growth from a year earlier and posted an ROE of 70.19%. The dividend costs the company $26 million a quarter, and there is $206 million in cash sitting on the balance sheet. While the company has high leverage, it does not warrant much concern since that, even without taking in another dollar of revenue, Vector could continue to service its debt obligations for another year and a half without a problem.

Vector's P/E is currently at a premium versus some of the major industry players, such as

British American Tobacco

(BTI) - Get Report

,

Altria Group

(MO) - Get Report

and

Reynolds American

(RAI)

. However, none of those competitors offer as high a yield, and Altria has been assigned a "hold" recommendation by TheStreet.com Ratings. Furthermore, British American Tobacco and Reynolds American have higher betas than Vector, 0.83 and 0.43, respectively. This means they are more volatile than Vector, which is the last thing most investors are looking for at this time.

Vector's stock has sunk 32% this year, the same as British American's and less than Altria's and Reynolds American's.

Vector has been rated a "buy" by TheStreet.com Ratings, which is something only 10.5% of the stocks tracked can claim. If you are still not convinced, ask yourself if Carl Icahn would invest in this company?

He did. He owns 20%.

Employees of TheStreet.com Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published. While employees cannot provide investment advice or recommendations, the writer appreciates your feedback and can be reached at david.macdougall@thestreet.com.