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Rothmans dividend machine snuffed out 

One of the great Canadian dividend plays is being snuffed out, as cash-spinning cigarette maker Rothmans accepts a $2-billion takeover bid from Philip Morris International.

Recall the famous line from Warren Buffett: "I'll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty."

To that line of reasoning, add the fact that the folks at Rothmans paid out an incredibly dependable 5 per cent dividend, and added in the occasional chunky special dividend when the coffers started to overflow.

For income-addicted investors who could get past Rothmans' line of business, this stock was a core holding. The cigarette company becomes even more attractive as income trusts head for extinction.

Philip Morris, 40-per-cent partner in the Canadian company's Rothmans Benson & Hedges operating subsidiary, is obviously attracted to that same cash flow, hence the friendly takeover.

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