Last month I wrote about an industry that has not only outperformed all others since 1900, but also offered some of the best yields in the United States.

And while I don’t advocate smoking, history shows that investing in tobacco companies is hugely profitable for investors looking for both capital gains and outsized dividends.

#-ad_banner-#Today I’d like to share with you an even better way to play the industry… with an investment many tend to overlook.

To reiterate how powerful tobacco stocks are, consider this:

One dollar invested in the U.S. stock market in 1900 would have been worth $35,255 at the end of 2014. That equals an average annual return of 9.6%. Not bad.

However, one dollar invested in the tobacco industry in 1900 would have ballooned to $6.28 million at the end of 2014, for an average annual return of 14.6%.

No other industry has come even close to delivering the returns the tobacco industry has in the last 115 years. According to data from Credit Suisse, tobacco outpaced the second-best performer, electrical equipment, by about 10 times.

There are three major tobacco companies in the United States. Altria (NYSE: MO) is the largest with a market capitalization of roughly $100 billion. Right now, it yields about 4.2%. Reynolds American (NYSE: RAI) and Lorillard (NYSE: LO) are about to merge to make the second-largest tobacco company with a combined value of around $65 billion. Reynolds pays a dividend of 3.5% while Lorillard pays 3.7%.

And it gets even better when you look at international tobacco companies that offer higher dividends. You are unlikely to hear about this group of securities because most investors are fixated on U.S. companies. 

But that’s too bad because there are plenty of safe, high-paying alternatives abroad.

A former holding of my High-Yield International newsletter, Phillip Morris International (NYSE: PM), yields 4.9%. However, right now I prefer another security, which is undervalued and offers a 5.6% yield. That’s a better dividend payout than any U.S tobacco company. Additionally, this firm has repurchased billions in shares in the last three years.

I’m talking about British American Tobacco (NYSE: BTI), which is headquartered in London and is the second-largest publicly traded tobacco company in the world behind only Phillip Morris. BTI’s product portfolio includes Pall Mall, Kool, Lucky Strike and Benson & Hedges.

Its consistent cash flows have enabled the company to grow its dividend substantially. The company’s dividend payments have grown close to 192% since 2005. And over the last 10 years, BTI has been on fire. Shares have increased more than 325%, far outperforming the S&P 500’s 75% return over the period.

As I mentioned earlier, Reynolds and Lorillard will merge soon, and that will create the second-largest U.S. tobacco company. This is important because BTI owns a 42% stake in Reynolds and contributed $4.7 billion to the deal. I expect the merger to increase Reynolds’ market share and grow its margins — both of which would be beneficial to BTI’s 42% stake.

Tobacco companies carry higher regulatory and legal risk than other industries, but they are some of the most reliable stocks in an industry that has a history of beating the S&P 500.

Savvy investors know that they can find bigger yields by looking overseas and not limiting themselves to U.S. stocks. That’s why my High-Yield International subscribers are earning yields of 6.1%, 8.3% even 11.2% — while investors who settle for U.S. stocks are earning much less.

If you’d like to learn more about why smart investors are seeking out high-yielding international stocks to earn reliable income, then I invite you to learn more here.