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Two European tobacco stocks, British American Tobacco, makers of Lucky Strike, Kool, and Newport cigarettes, and Philip Morris Internationa l, best known for its Marlboro brand, offer some stability for whipsawed investors.

After being beaten up for most of this year, the shares of both British American (ticker: BTI) and Philip Morris (PM) are substantially undervalued, generally less volatile than the overall market, and yield huge dividends.

“We believe that the most recent pullback in [British American] is excessive, and the current share price offers risk-tolerant investors a favorable entry point,” says a recent analysis from Argus Research, which sees the price potentially hitting $60, up more than 87% from $32.04 recently. The share price drop was triggered in part by a possible ban of menthol cigarettes and flavored electronic cigarettes in the U.S.

Shares of Swiss-based Philip Morris (PM) were similarly bashed, at least partially on recent worries over the company’s loss of market share in e-cigarettes. Still, research firm CFRA sees the stock potentially hitting $92 over the next year, up 33% from a recent $69.

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This year has been bad for British American and Philip Morris investors. Year to date, the stocks shed more than 50% and 30%, respectively. That compares with 8% for the S&P 500 over the same period. All figures exclude dividends. Yet that plunge makes them inexpensive. British American trades at a forward price/earnings ratio of 8.1, versus 16.2 in 2017, while Philip Morris trades at 13.1, versus 20 last year, according to Morningstar. The companies are projected to have dividend yields of 8.5% and 6.6%, respectively.

Their appeal goes beyond low valuation. Both have betas less than one, which means their stock prices typically move less than the overall market. Despite the recent downdraft in prices, Philip Morris’s beta is close to zero, while British American’s is 0.7. That lack of correlation with the broader market helps reduce the overall risk within a portfolio.

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Both companies are consistently profitable, well managed, and shareholder focused. Gross margins at British American have remained above 70% consistently over the last reported decade, while Philip Morris carved out gross profits above 60% over the same period. That compares with 35% on-average over the last year for the S&P 500, according to the latest data from CSI Market. “We expect to exceed our high single-figure adjusted-diluted earnings-per-share growth at constant rates of exchange,” British American CEO Nicandro Durante said earlier this month. In other words, expect EPS to grow between 5% and 9.9% when adjusted for currency movements.

British American and Philip Morris are both heavily engaged in new technology initiatives. The former says it is “on track” to hit 900 million pounds ($1.1 billion) in revenue this year from tobacco-heated products and its Vapour e-cigarette. Philip Morris says it is “committed to transform its business and encourage all men and women who would otherwise continue smoking to replace cigarettes with better alternatives as soon as possible.”

The health risks of smoking, as well as efforts by governments around the world to curb the practice, present challenges to both companies. The efforts to introduce heated tobacco or so-called vaping products may not offset falling cigarette sales. Plus, the brands, which remain powerful, may not appeal to younger consumers as much as they did in the past. That said, these low valuations, high dividends, and fat profit margins make these firms worth a bet.

Write to Simon Constable at reports@wsj.com