24/7 Wall St. Insights
- Altria Inc. (NYSE: MO) stock has outperformed the S&P 500 this year and offers a generous dividend.
- Little surprise, the consensus recommendation of analysts is to buy shares.
- Also: Dividend legends to hold forever.
Companies with high dividend yields are supposed to post below-market stock performance. Tobacco company Altria Inc.’s (NYSE: MO) shares are up 24% this year, while the S&P 500 is 22% higher. It is rare for investors to “have their cake and eat it, too.”
There is no ready explanation for Altria’s market success. Its balance sheet, steady demand for cigarettes, modest earnings increases, and high yield should make it a defensive stock that bolsters returns when the broader market is in trouble. It is more like gold than investments in Amazon or Alphabet.
There is a single reason Altria may have such strong dividend performance—a theory. Investors may not want to invest in a tobacco company because its products are dangerous and have been proven to kill smokers.
Another reason investors buy the stock is that earnings have been unusually strong recently. In the most recently reported quarter, revenue fell 4.6% to $6.2 billion. However, per-share earnings rose by 85.7% to $2.21. The company also raised its full-year guidance.
According to Yahoo Finance, eight of the 12 analysts who cover Altria’s stock rate it as a Buy or Strong Buy. None rate it a Sell. Professional investors believe Altria has a bright future.
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