Altria Earnings Show That the Dividend Is Sustainable

Companies and Brands

Published: January 30, 2015 7:50 am

Last Updated: January 30, 2015 7:55 am

Altria Group Inc. (NYSE: MO) reported fourth-quarter and full-year 2014 results before markets opened Friday morning. For the quarter, the tobacco company posted adjusted diluted earnings per share (EPS) of $0.66 on revenues of $4.61 billion, excluding $1.65 billion in excise taxes paid. In the same period a year ago, the company reported adjusted EPS of $0.57 on revenues of $4.4 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.67 EPS and $4.53 billion in revenues, excluding excise taxes.

For the full year, Altria posted EPS of $2.57 on revenues of $17.95 billion (excluding $6.58 billion in excise taxes), compared with EPS of $2.38 and revenues of $17.66 billion in 2013. The consensus estimates called for EPS of $2.57 on revenues of $17.88 billion.

The maker of Marlboro cigarettes provided fiscal year 2015 adjusted EPS guidance of $2.75 to $2.80. The company expects a tax rate of 35% and capital spending in the range of $200 million to $250 million. Consensus estimates call for 2015 EPS of $2.80 on revenues of $18.18 billion.

In August the company increased its quarterly dividend from $0.48 to $0.52, and Altria’s dividend yield at Thursday’s closing price is 3.8%. The company said that it paid more than a billion in dividends in the fourth quarter and $3.9 billion in all of 2014. Altria reaffirmed that the company expects to continue to return a large amount of cash to shareholders in the form of dividends by maintaining a dividend payout ratio target of approximately 80% of its adjusted diluted EPS.

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Altria repurchased about 5.3 million shares of its common stock in the fourth quarter at a cost of $260 million. For the full year the company repurchased approximately 22.5 million shares at a total cost of $939 million. Altria has approximately $518 million remaining in the current $1 billion share repurchase program, and the company expects to complete the authorized buybacks by the end of 2015.

The company’s CEO said:

Our business results were anchored by a very strong performance in the smokeable products segment, complemented by contributions from our diverse business model. We’re also pleased with the steady progress Nu Mark is making as it builds e-vapor category leadership; Nu Mark successfully executed its national launch of MarkTen, which is now available in over 130,000 retail stores.

Shipment volumes for the Altria’s smokeable products decreased by 1.7%, but the company was able to raise prices to keep adjusted margins near 44%.

Altria’s shares were inactive in premarket trading Friday morning, having closed Thursday at $54.39, up about 0.7% on the day, in a 52-week range of $33.80 to $55.18. Thomson Reuters had a consensus analyst price target of around $53.00 before the earnings report.

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