Shares in tobacco companies British American Tobacco (BATS) and Imperial Brands (IMB) have taken an hit on reports that the US regulatory agency may propose a ban on menthol cigarettes.
British American Tobacco fell 9% to £30.15 while Imperial Brands declined 3.8% to £36.44 on the speculation.
The former has taken a bigger hit as it owns the Newport brand of menthol cigarettes after acquiring Reynolds American last year.
The tobacco industry has been out of favour with investors for much for 2018 amid fears of a regulatory crackdown and declining cigarette volumes.
Historically, tobacco stocks have appealed to investors thanks to their high and relatively stable dividend yields.
British American Tobacco currently trades on a 6.4% prospective dividend yield and Imperial Brands yields 7%.
POTENTIAL BAN COULD HIT FAST-GROWING RIVAL JUUL
The US Food and Drug Administration is pondering plans to help protect teenagers and young people by making it harder to buy trendy flavoured pods for e-cigarettes, including mango, cucumber and crème.
Last week, shares in British American Tobacco and Imperial Brands rose on reports of a potential ban on flavoured pods as such a move would be devastating for fast-growing rival Juul, thereby weakening one of their major competitors.
Juul launched three years ago and has already gained over 70% of the US e-cigarette market.
For information on the current state of the tobacco market, read our recent analysis for free here (20 Sep) and here (26 July).
