Critical Survey: Japan Tobacco (OTCMKTS:JAPAF) vs. Universal (NYSE:UVV)

Dividends

Japan Tobacco pays an annual dividend of $79.71 per share and has a dividend yield of 274.8%. Universal pays an annual dividend of $3.28 per share and has a dividend yield of 6.0%. Japan Tobacco pays out 35.3% of its earnings in the form of a dividend. Universal pays out 86.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Universal has raised its dividend for 56 consecutive years. Japan Tobacco is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Japan Tobacco and Universal’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Japan Tobacco	N/A	N/A	N/A
Universal	3.22%	7.89%	3.84%

Institutional and Insider Ownership

24.7% of Japan Tobacco shares are owned by institutional investors. Comparatively, 81.0% of Universal shares are owned by institutional investors. 1.9% of Universal shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Japan Tobacco and Universal”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Japan Tobacco	N/A	N/A	N/A	$225.55	0.13
Universal	$2.95 billion	0.46	$95.05 million	$3.78	14.40

Universal has higher revenue and earnings than Japan Tobacco. Japan Tobacco is trading at a lower price-to-earnings ratio than Universal, indicating that it is currently the more affordable of the two stocks.

Summary

Universal beats Japan Tobacco on 8 of the 11 factors compared between the two stocks.

About Japan Tobacco

Japan Tobacco Inc., a tobacco company, manufactures and sells tobacco products, pharmaceuticals, and processed foods in Japan and internationally. The company operates through three segments: Tobacco Business, Pharmaceutical Business, and Processed Food Business. It offers tobacco products, such as cigarettes, heat-not-burn tobacco products, E-vapor products, fine cut tobacco products, cigars, pipes, smokeless tobacco products, and hookah and kretek products. The company provides reduced-risk products, including infused tobacco capsules and heated tobacco sticks. In addition, it researches and develops, manufactures, and sells prescription drugs for the therapeutic areas, such as cardiovascular, kidney and metabolism, immunity/inflammation, and central nervous system. Further, the company provides frozen and room-temperature products, such as frozen udon noodles, packed rice, and frozen okonomiyaki; bakery products; and seasonings, including yeast extracts, assembled, kelp and bonito extracts, and oyster sauces. It offers its products under the Winston, Camel, MEVIUS, and LD brands. Japan Tobacco Inc. was incorporated in 1985 and is headquartered in Tokyo, Japan.

About Universal

Universal Corporation processes and supplies leaf tobacco and plant-based ingredients worldwide. The company operates through two segments, Tobacco Operations; and Ingredients Operations. It is involved in the procuring, financing, processing, packing, storing, and shipping leaf tobacco for sale to manufacturers of consumer tobacco products. The company contracts, purchases, processes, and sells flue-cured, burley, and oriental tobaccos that are primarily used in the manufacture of cigarettes; and dark air-cured tobaccos principally used in the manufacture of cigars, natural wrapped cigars and cigarillos, smokeless, and pipe tobacco products. It also provides value-added services, including blending, chemical, and physical testing of tobacco; service cutting for various manufacturers; manufacturing reconstituted leaf tobacco; just-in-time inventory management services; electronic nicotine delivery systems; and smoke testing services for customers. In addition, the company offers testing services for crop protection agents and tobacco constituents in seed, leaf, and finished products, including e-cigarette liquids and vapors; and analytical services that include chemical compound testing in finished tobacco products and mainstream smoke. Further, it provides a various value-added manufacturing processes to produce specialty vegetable and fruit-based ingredients, as well as botanical extracts and flavorings for human and pet food markets; and recycles waste materials from tobacco production. Universal Corporation was founded in 1886 and is headquartered in Richmond, Virginia.