Reynolds American (RAI - option chain) shares are rising today after the company announced several pieces of news this morning. RAI said its board has approved a 2-for-1 stock split as well as a 10% hike in its quarterly dividend to 49 cents per share from 45 cents per share on a split-adjusted basis. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on RAI.

RAI opened this morning at $60.63. So far today the stock has hit a low of $60.60 and a high of $61.82. As of 11:24, RAI is trading at $61.73 up 1.76 (2.9%), which is a huge move for this conservative, income stock. The chart for RAI looks bullish and S&P gives RAI a positive 4 STARS (out of 5) buy ranking.

Lorillard (NYSE: LO) closed at $57.35. LO, Altria Group (NYSE: MO), and Reynolds American (NYSE: RAI) have recently announced an increase in cigarette prices. LO April and June option implied volatility of 47 is below its 26-week average of 51, according to Track Data, suggesting decreasing price movement.

RAI closed at $33.54. RAI April and August option implied volatility of 37 near its 26-week average according to Track Data, suggesting non-directional price movement.

MO closed at $16.60. MO April and September option implied volatility of 35 is below its 26-week average of 40, according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

.Tonight on CNBC's MAD MONEY, Jim Cramer tauted Reynolds American (NYSE:RAI) as a high dividend stock with a safe yield that out pays US treasury yields. Even with the 5.5% yield he thinks this dividend is not at risk like some other high yield stocks. He sounded like he even likes it better than Altria (NYSE:MO) as the smokeless tobacco is doing well.

I have noted before about defensive stocks being the way to go and those companies' products are the ones you eat, drink, smoke, and use for critical personal hygiene (toilet paper, tooth paste, deodorant... you get the idea). We noted the sector back on our own list we titled "Defensive Stocks For A Crummy Market" recently, although we had others. Defensive investing is what investors will flock to when they have to own stocks but want to be a bit more conservative than chasing the "New Four Horsemen of Tech" or want to go for less aggressive picks than say his TOP NINE STOCKS for 2007.

Jon Ogg is a partner at 24/7 Wall St. and publisher of Special Situation Investing Newsletter. He does not own securities in the companies he covers.

The Family Smoking Prevention and Tobacco Control Act, to be voted on today by the Senate Health Committee, seems on the fast track to approval. If passed into law it will place the tobacco industry under the oversight of the Food and Drug Administration. The measure, supported by health groups and some of the industry, will give the agency some broad powers in regulating the contents and sales of tobacco products.

Industry heavyweight Altria Group's (NYSE: MO) Phillip Morris favors the bill, but others such as Reynolds American's (NYSE: RAI) R.J. Reynolds oppose it, claiming the regulations would limit its ability to compete with the market leader.

MOST NOTEWORTHY: Krispy Kreme (KKD) and Reynolds American (RAI) top today's modest-sized initiation list.

• Krispy Kreme Dough nuts, Inc. (NYSE:KKD) was initiated with a Buy and $15 target at Prudential. The firm is positive on the high brand loyalty and unique business model that has the ability to create strong cash flows and high return on investment capital.
• Reynolds American, Inc. (NYSE:RAI) was initiated with a Neutral and $58.50 target at Credit Suisse.

OTHER INITIATIONS:

• The Lodging REITS sector was initiated at Morgan Keegan.
  • The firm initiated coverage of Felcor Lodging Trust Inc (NYSE:FCH) with an Outperform rating and
  • American Home Products (AHP), Eagle Hospitality Properties Trust (NYSE:EHP), Innkeepers USA Trust (NYSE:KPA) and Winston Hotels Inc (NYSE:WXH) with Market Perform ratings.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).