24/7 Insights:
- Altria Group Inc. (NYSE: MO) has several reasons for its generous dividend.
- Its yield is almost certain to stay high for years.
The share price of Altria Group Inc. (NYSE: MO), the tobacco company, has risen 14% this year to about $46. That compares to an 11% gain for the S&P 500. The stock also has an 8.52% dividend yield. Altria is rarely purchased because it is a candidate for sharp price increases, so for some investors, the yield must be sufficient.
Altria’s yield may be so high because its management believes people are reluctant to own stock in a company that makes cigarettes. However, there is no firm proof of that. The stock has other reasons that make it attractive, particularly for investors who value extraordinary yield compared to the shares of almost any other U.S. company that trades on a major exchange.
Altria recently posted solid but uninspiring financials. However, the numbers also showed that the company has a rock-solid balance sheet that allows it to keep the dividend payout high.
Revenue dropped 2% to $5.6 billion in the first quarter of 2024, while diluted per-share earnings rose 21% to $1.21. Another important part of the announcement was that the board increased the money authorized for share buybacks by $2.4 billion above the then-current $1.0 billion level. It added that dividend payout in the first quarter totaled $1.7 billion. Finally, management affirmed its guidance for the rest of the year.
Among the most important things for investors is that Altria has $3.6 billion on its balance sheet. The maturity of its $25 billion in long-term debt stretches out for years.
Finally, most of Altria’s revenue is based on one of the world’s best-known and most valuable brands. Marlboro often shows up on lists of most valuable brands and has for as long as there have been such lists. The Marlboro brand is almost exactly 100 years old.
It is almost certain Altria’s yield will stay high for years.
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