Key Points About This Article: 

• Altria Group Inc. (NYSE: MO) stock is up 14.2% in 2024, with a total return of 19.38% including dividends, outpacing the S&P 500.
• See our new Free Report on Legendary Dividend Stocks to Buy Now.
• Altria is pivoting towards reduced-risk products like e-cigarettes and vaping, highlighted by its acquisition of NJOY, the only company with an FDA-approved portfolio.

Sin stocks are supposed to be among the most reliable stocks to own. In good times, they are capable of delivering market-beating returns. Yet, they have a defensive quality to them as well. That means, even when consumers pull back from other purchases, they will frequently prioritize their vices. Hey, we don’t make the rules.  

That’s one reason to consider an investment in Altria Group Inc. (NYSE: MO). The company’s stock is up 14.2% in 2024. That’s within striking distance of the S&P 500’s 17.5% growth. In fact, until the index’s summer rally MO stock was outpacing it.  

But when it comes to a stock like Altria, investors have to look at the total return. This takes into account the stock price appreciation plus the company’s substantial dividend. When that’s taken into account, Altria is up 19.38% this year, outpacing the S&P 500.  

However, investing in any stock is a what have you done for me lately proposition. There are a couple of additional reasons to believe the stock can continue to outperform for investors.  

Why Dividend Stocks Matter to Investors? 

 

Many growth-oriented investors dismiss dividend-paying stocks as being too conservative. There’s some truth to that, but if you don’t invest in quality dividend stocks, you could be leaving nearly one-third of your potential total returns on the table.  

Since 1926, dividends have made up approximately one-third (32%) of the S&P 500 index’s total return. And there’s this factoid from 24/7 Wall Street contributor Lee Jackson. The Hartford Funds, in collaboration with Ned Davis Research, performed a study that found dividend stocks delivered an annualized return of 9.18% over the past 50 years. That’s more than double the 3.95% annualized return of non-paying dividend stocks.  

Investing in Risk Management?  

 

Altria is best known for being a cigarette company and the home of the iconic Marlboro brand. However, cigarette smoking continues to decline. Altria knows this and has been advancing its Moving Beyond Smoking initiative for years.  

One of the key elements of this pivot is the e-cigarette and vaping market which is showing explosive growth. According to Grand View Research, the e-cigarette and vape market was valued at $28.17 billion in 2023. And it’s expected to grow at a compound annual growth rate of 30.6% from 2023 to 2023.  

You can take the approach that there’s no such thing as same smoking. And while vaping hasn’t been around long enough for definitive long-term research, studies are showing the harmful effects of vaping. Nevertheless, in the tobacco industry, these are called reduced-risk products (RRP). And Altria has taken a big step towards capturing additional market share with its acquisition of NJOY in March 2023. This is significant because NJOY is the only company that has an FDA-approved portfolio.  

MO Stock Appears to be Undervalued 

Altria’s five-year total return of 40.21% isn’t going to impress many investors. And if you look at the stock chart, you realize that most, if not all, of that gain has come because of the company’s dividend.  

But if you put that into context, the company is still managing to average high single-digit growth at a time when its core product is in what appears to be an irreversible slide.  

That means you should look at the company’s valuation. And when you do you see a company that’s trading at just 9x forward earnings with a free cash flow yield of 10.5% which is 3x that of the S&P 500. Furthermore, the company is a dividend king that has increased its dividend for 55 consecutive years. That puts some teeth into the company’s dividend yield which is 8.51%. 

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