Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

February 2, 2011 - Universal Corp. (UVV-NYSE) together with its subsidiaries, operates as a leaf tobacco merchant and processor worldwide. It selects, procures, buys, processes, packs, stores, supplies, ships, and finances leaf tobacco for sale to, or for the account of, manufacturers of consumer tobacco products.

This used to be the Universal Leaf Tobacco Company, a perfect description of its business. It's the largest leaf tobacco exporter/importer in the world. It buys and sells in 35 countries and has over 25,000 employees, permanent and seasonal combined. It used to have lumber and building products but sold those in 2006. In the same year, it sold the majority of its agri-business division. Now it's focused on tobacco leaves almost exclusively.

As much as one reads about the dangers of smoking, it hasn't affected sales dramatically. They were $2.146 billion in 2007, then $2.555 billion in 2008. 2009 showed a decrease to $2.492 billion. 2010 probably will finish at $2.4 billion. Fiscal year ends March 31. Projections for 2011 show $2.45 billion.

Earnings have been growing since 2005 when they were $2.09 a share, down from $4.31 in 2004. 2010 should wrap with $4.60, down from $5.68 in 2009. For 2011, analysts see $5.10. Next quarterly report is due out on February 8.

The dividend has increased every year for 40 years. My last data point is 1994 when it was 94 cents a share. Last year it was $1.88. This year should be $1.92 for a yield of 5.10%. Next quarterly payment will be on February 13 for shareholders of record on January 6.

Look for supply and demand to find a better balance by next year. When tobacco prices fall, so do acres devoted to it. Farmers will plant other crops, supply will lessen. Also helping the company next year will be recent cost cutting as well as lower interest rates. Looking beyond next year, concerns are growing about health related issues as well as cigarette manufacturers going directly to farmers to buy tobacco.

More numbers: Market Cap puts this one as a Small Cap at $910 million. Trailing P/E is 7.54. Price to sales ratio is .38. Price to book is .97. Book value is $39.39. Operating margin for the last 12 months was 9.37% and Profit margin was 6.14%. Return on equity was 13.15% and Return on assets was 5.94%. Total cash is $43.82 for $1.84 a share. Total debt is $799.19 million. Debt to equity is 69%. Current ratio is 2.27. Beta is .98. Over the last 52 weeks, the stock is down 19.27%. There are 23.79 million shares outstanding with a Float of 23.35 million. Insiders own 5.69%. Institutions have 92.70% of the Float.

There's nothing to suggest this stock will go up dramatically. Capital gains will be hard to come by. But the dividend is solid and doesn't take much of earnings. As recently as 2008, the stock traded at $68 a share. It's almost half that value now. Still with ever clamoring concerns about smoking and health, it's hard to imagine this as a growth stock. Income investors should like the stock but only for its dividend.

- Company Web site: www.universalcorp.com

- Ted Allrich