Altria Group Inc. (NYSE: MO | MO Price Prediction) is rewarding its shareholders once again with a quarterly dividend of $1.02, payable on Friday, Jan. 10. That is the same as in the prior payout. The company admitted recently that one its most high-profile brands has seen waning demand, but the ongoing dividend payment underscores the management’s commitment to delivering consistent value to investors.
Why Investors Like Dividends
Dividend stocks offer two benefits.
Investors favor dividend stocks for two main reasons. The first is that they offer enticing total return potential. Total return is a comprehensive measure of investment performance that includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. It is one of the most effective ways to boost the prospects of overall investing success.
Dividend stocks can also provide investors with a steady, reliable stream of passive income. Passive income is money that is earned with little to no ongoing effort, usually from assets that generate cash flow. This income can come from a variety of sources, including stock dividends. Generating passive income is a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.
A Dividend Aristocrat
Altria has grown its dividend for 54 straight years.
Altria is the epitome of a stable and dependable stock. It has not only paid out but has increased its dividend annually for 54 years. That is more than double the 25 straight years of growth it takes for an S&P 500 member to become a Dividend Aristocrat. In fact, that makes it a Dividend King, a member of that exclusive group of stocks that have at least 50 consecutive years of dividend growth.
Since 2008, its dividend has had a compound annual growth rate of around 5.6%. The current dividend yield is about 7.8%, which is higher than the average yield of its industry and well above that of the consumer staples sector and the S&P 500. So it is a passive income winner. A $1,000 investment is good for about 19 shares, which generates about $80 a year in dividends.
Note that Altria’s share price has grown by more than 132% since 2008 as well, offering investors some growth along with income.
Altria, the Company
One of the world’s largest producers and marketers of cigarettes and other tobacco-related products.
The company manufactures and sells smokeable and oral tobacco products in the United States. It offers:
- Cigarettes primarily under the Marlboro brand
- Large cigars and pipe tobacco under the Black & Mild brand
- Moist smokeless tobacco and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands
- Oral nicotine pouches under the on! brand
- E-vapor products under the NJOY ACE brand
It is also one of the world’s largest producers and marketers of medical products in the treatment of illnesses caused by tobacco. Altria sells its products to distributors, as well as large retail organizations such as chain stores.
Its headquarters are in Henrico County, Virginia, just outside the city of Richmond. The company was incorporated in 1902 as Philip Morris & Co. It went public in January of 1970, and its name changed to Altria in 2003. Now it competes with or is similar to, among others:
- British American Tobacco PLC (NYSE: BTI)
- Philip Morris International Inc. (NYSE: PM)
- Universal Corp. (NYSE: UVV)
Altria posted better-than-expected third-quarter results as robust vape and nicotine pouch demand offset shrinking market share for the Marlboro brand. The fourth-quarter report is expected at the end of January, and analysts expect per-share earnings to be 9% or so more than a year ago.
Altria, the Stock
Wall Street is cautious.
The share price is 4% or so higher than five years ago, underperforming the Dow Jones industrials. In the past year, though, its more than 24% gain is greater than that of the S&P 500. Shares hit a multiyear high of $58.04 at the end of November, which is higher than the mean price target is $56.80. While Wall Street sees over 11% upside in the coming year, only five of 13 analysts recommend buying shares. Last month, BofA Securities boosted its rating on the stock to Buy.
Institutional investors hold about 61% of the shares. BlackRock, State Street, and Vanguard have notable stakes. Note that more than 28 million shares, or less than 2% of the float, are held short. Also, there have been no insider transactions in the past few months.
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