This news comes on the heels of news that Reynolds American Inc. will be buying Lorillard Tobacco (LO) the country’s No. 3 cigarette maker, in a $25 billion deal. That would create a tobacco company second only in the U.S. to Marlboro-maker Altria Group Inc.

In looking at some of the biggest holders of Reynolds American shares, we find Federated Strategic Value Dividend Fund (SVAAX) with nearly 6.2M shares, representing 4.19% of the fund’s overall assets. As well, Sunamerica Focused Dividend Strategy Portfolio (FDSAX) holds slightly over 5.1M shares, representing 3.67% of the fund’s overall assets.

Tobacco names have consistently faced litigation worries, but have been able to get verdict amounts reduced substantially to avoid any potential long-term business worries.

With this case taking headlines and the trend of cigarette smoking declining in the most recent decades, mutual fund managers may have to think how safe future dividend yields/payouts may be if an increase in litigation cases gets jury reactions as we saw this past weekend.