Stock Picks For The E-Cigarette Surge

Recent sales figures for companies that produce electronic cigarettes (or e-cigarettes) have been encouraging in the last few quarters. But this budding industry has taken some time to filter into mainstream investment strategies. For those looking to gain some long-term exposure to the sector, it makes sense to look for companies that offer attractive dividend yields and are supported by solid underlying fundamentals, as there are some excellent opportunities for those looking to gain exposure to an up-and-coming industry. There are many stock choices (both small-cap and large-cap) that can be used to capitalize on the new trends in the consumer space, and here we will look at some of the best choices.

Domestic e-cigarette sales

Domestic sales in the last few quarters have provided one of the best indications of the latest market trends. Sam Hadi at CloudCig said :

More and more consumers are making the transition to healthier tobacco alternatives. Rising domestic usage in electronic cigarette markets generated sales of more than $1 billion in 2013.

Furthermore, the clarity of these figures has prompted some of the larger cigarette manufacturers to move into the electronic space and divert resources from more traditional products in paper tobacco. This supports the prospects for improved earnings in companies that have exposure to the sector, as there is little reason to believe that the average annual performance is likely to abate any time soon. Approximately 2.7% of American smokers have already taken part in the e-cig experience, and consumer trends toward health-conscious behavior suggest that these numbers are likely to grow in the future.

Global exposure

Consumer trends that start in the U.S. tend to expand elsewhere, and some of the companies that are best positioned to capitalize on rising e-cigarette purchases are those with global exposure. One example can be found in British American Tobacco (NYSEMKT:BTI), which has collected a strong consumer base in both the U.S. and in the U.K. The company's Vype e-cigarette is coming online in retail outlets, and their recent purchase of a 42% stake in Reynolds American (NYSE:RAI) (worth $11.5 billion) will give the company greater traction in U.S. markets. BTI's 2.7% dividend yield makes the stock attractive, given the low interest rate scenarios we are likely to see for the remainder of the year.

Lorillard (NYSE:LO) is another key company to watch, given the fact that is was the first of the major cigarette producers to step into the e-cigarette space. Two years ago, Lorillard acquired Blu eCigs, adding to its global portfolio which also includes the U.K.'s SKYCIG. These acquisitions h