Tobacco stocks are fashionable again, but investors’ taste for nicotine may not last.

In this year’s rocky markets, the U.S.-listed shares of cigarette producers Philip Morris International and Altria have risen 14% and 6%, respectively, making tobacco the fourth biggest gainer among the S&P 500 index’s more than 60 subsectors. London-listed Lucky Strike owner British American Tobacco has fared even better, up more than a fifth.

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Tobacco stocks are fashionable again, but investors’ taste for nicotine may not last.

In this year’s rocky markets, the U.S.-listed shares of cigarette producers Philip Morris International and Altria have risen 14% and 6%, respectively, making tobacco the fourth biggest gainer among the S&P 500 index’s more than 60 subsectors. London-listed Lucky Strike owner British American Tobacco has fared even better, up more than a fifth.

It is a pleasant change for the industry, whose stocks have underperformed since late 2017 because of worries about stricter government tobacco controls and investors’ screening out cigarette companies for ethical reasons. The United Nations’ Tobacco Free Finance Pledge has been signed by firms that manage $12.2 trillion, equivalent to around 10% of the assets overseen by the world’s top 500 asset managers.

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The companies reported robust full-year results this week. On Friday, BAT said sales of its smokeless products like Vuse e-cigarettes grew more than 50% in 2021. In the second half, Vuse broke even for the first time in the U.S. market.

Philip Morris, which sells Marlboro cigarettes outside the U.S., said net revenue from “reduced risk products” like its IQOS heated tobacco sticks accounted for 31% of the group’s total in the last quarter of 2021. Altria, which sells Marlboros in the U.S., hasn’t made as much progress building smoke-free brands since its disastrous 2018 bet on e-cigarette maker JUUL Labs. However, it pointed out that recent weakness in U.S. cigarette volumes is in line with long-term averages when looked at over a two-year period.

Although the latest numbers were broadly encouraging, the recent rise in tobacco shares is probably driven by hedge funds’ switching from growth to value stocks rather than an influx of long-term investors, Jefferies analysts say. The funds may be looking for companies that pay generous dividends as an inflation hedge. The S&P 500 High Dividend Index is up 2.4% this year, compared with a 7% fall in the wider blue-chip index. Tobacco companies generate a lot of cash and pay it out: Even after its recent rally, BAT’s dividend yield is 6.5%.

For the revaluation of tobacco stocks to continue, investors would need to be convinced that regulatory threats are easing, or that profits from smokeless products are rapidly replacing those from lucrative traditional smokes. Here, the signs are mixed.

PMI and BAT are making progress in developing less-risky products like e-cigarettes. However, the European Union, where smoking rates are much higher than in the U.S., is reviewing how it taxes all tobacco products. If it raises levies on smokeless products, tobacco companies could find it harder to persuade smokers to switch over, or to make a big profit on them if they do. The U.S. Food and Drug Administration wants to ban menthol cigarettes, a move that would hit Newport-owner BAT hard.

The run-up in tobacco shares is a sign that investors see them as a haven amid rising interest rates. It shouldn’t be taken as a vote of confidence that the industry’s problems are going away.

Write to Carol Ryan at carol.ryan@wsj.com