Yield stocks grab few headlines during a period when the value of the Magnificent Seven continues to surge. Some of the seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) have been up more than 50% in the past year, compared to a 23% rise in the S&P 500. (Apple’s stock and Tesla’s have been shaky recently.) Why invest in any shares that might underperform the S&P 500 in 2024? The answer is safety, stability, and stock with a yield that is much better than anything short of junk bonds. (These five top Wall Street stock picks for 2024 come with huge dividends.)
The Magic of Altria Stock
Altria Group Inc. (NYSE: MO), a huge tobacco company, has a dividend yield of 9.8%. Altria’s stock generally does not move much, either up or down. It is flat compared to the start of this year.
Altria’s revenue fell 2% yearly to $6 billion in the most recent quarter. Operating income was flat at $2.8 billion. The 46% operation income margin shows the leverage Altria has in making commodity products on which it can get a strong brand price. Almost all its cigarette sales are under the Marlboro brand, which, according to BrandZ, is the 30th most valuable brand in the world at $57 billion. Altria’s chief executive officer, Bill Gifford, said, “It was a pivotal year for Altria as we made significant progress in pursuit of our Vision by enhancing our smoke-free product portfolio while our businesses performed well in a challenging environment.”
Part of Altria’s magic for yield investors is the $14 billion it has on its balance sheet. The company does not need this money for operations because of positive cash flow. That means Altria’s dividend is solid. The tobacco business may be out of favor, and massive shareholder lawsuits in 1998 cost the industry $246 billion. Yet, the financial effects are long gone as a factor for Altria’s dividend.
Altria’s pitch to investors who are reluctant to invest in a company that makes a deadly product is that it is creating less deadly tobacco products. That is how it describes itself to Wall Street. It is what management calls “Moving Beyond Smoking,” which makes it a “tobacco harm reduction company.” This means producing “smoke-free” tobacco products. Nevertheless, cigarettes drive Altria’s financials and will for many years.
Altria stock investors who are willing to ignore the ill effects of smoking get a tremendous and steady yield.
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