VGR - Vector Group: Dividend Safety Looking Thin Without Douglas Elliman

• Vector Group completed their Douglas Elliman spin-off at the end of 2021, thereby making their company tobacco-focused.
• Whilst tobacco is economically resilient, the loss of their Douglas Elliman operating cash flow makes the outlook for their dividend coverage worse and likely to see thin coverage at best.
• This spin-off also saw their cash balance decrease considerably more than their debt, thereby pushing their leverage higher.
• When utilizing their estimated underlying residual operating cash flow following their spin-off, it now appears that their leverage will be very high.
• These variables are toxic for dividend safety, which offsets the desirability of their high yield and thus I believe that maintaining my hold rating is appropriate.

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