High Dividend 50: Altria Group – Sure Dividend

Up to date on Could thirty first, 2024 by Bob Ciura

Excessive-yield shares pay out dividends which might be considerably greater than market common dividends. For instance, the S&P 500’s present yield is simply ~1.4%.

Excessive-yield shares will be very useful to shore up revenue after retirement. A $120,000 funding in shares with a mean dividend yield of 5% creates a mean of $500 a month in dividends.

Altria is a part of our ‘Excessive Dividend 50’ collection, the place we cowl the 50 highest yielding shares within the Certain Evaluation Analysis Database.

We now have created a spreadsheet of shares (and carefully associated REITs and MLPs, and many others.) with dividend yields of 5% or extra…

You may obtain your free full record of all securities with 5%+ yields (together with vital monetary metrics reminiscent of dividend yield and payout ratio) by clicking on the hyperlink under:

Subsequent on our record of excessive dividend shares to evaluate is Altria Group (MO).

Altria has a 54-year dividend improve streak, which qualifies it as a Dividend King. A big a part of why Altria has been in a position to elevate the dividend for thus lengthy is due to its a number of aggressive benefits.

Enterprise Overview

Altria is a tobacco inventory that sells cigarettes, chewing tobacco, cigars, e-cigarettes, and extra underneath quite a lot of manufacturers, together with Marlboro, Skoal, and Copenhagen, amongst others.

The corporate additionally has a 35% funding stake in e-cigarette maker JUUL, and a forty five% stake within the hashish firm Cronos Group (CRON).

The vast majority of Altria’s income and revenue remains to be made up of smokeable tobacco merchandise. The Marlboro model nonetheless enjoys the main market share within the U.S. market.

Supply: Investor Presentation

Over many many years, this has served the corporate (and its shareholders) very nicely. Whereas excessive dividend yields are widespread with tobacco shares, no different firm within the {industry} has a dividend improve streak so long as Altria’s.

Within the 2024 first quarter, Altria’s web income of $5.576 billion declined 2.5% from the primary quarter of 2023, with income web of excise taxes at $4.717 billion, down 1.0%.

Adjusted diluted EPS stood at $1.15, a lower of two.5% in comparison with the identical interval final 12 months.

Development Prospects

Altria’s future development faces an unsure future as a consequence of altering client habits.

As a serious tobacco firm, Altria has to face the truth of declining smoking charges in america. Annually, there are fewer cigarette people who smoke within the U.S. Consequently, there are fewer clients for tobacco firms like Altria.

The overall {industry} decline was estimated at 8% in 2023. Altria’s declines replicate the industry-wide challenges.

Historically, tobacco producers have compensated for falling smoking volumes with value will increase. Up to now, this has labored to offset misplaced income. Altria will proceed to lift costs within the years to return.

However nonetheless, tobacco firms should adapt to the brand new setting, and Altria is getting ready for a post-cigarette world by investing within the growth of smoke-free merchandise.

Supply: Investor Presentation

Altria has invested closely in non-combustible merchandise, reminiscent of its $13 billion funding in e-cigarette chief JUUL and its $1.8 billion funding in Cronos. E-vapor and hashish may very well be two main long-term development catalysts going ahead.

Altria has additionally acquired Swiss firm Burger Söhne Group, to commercialize it’s on! oral nicotine pouches. Oral tobacco is a development space for Altria, as customers who’ve stop smoking more and more shift to oral tobacco merchandise.

The corporate can even be capable of generate earnings-per-share development by value reductions and share repurchases. Altria utilized $1 billion for share repurchases in 2023, and $1.8 billion in 2022.

In all, we count on ~2.4% compound annual development for Altria’s earnings-per-share over the following 5 years.

Aggressive Benefits & Recession Efficiency

Altria advantages from a mess of aggressive benefits, which have allowed the corporate to generate regular development over many years. First off, Altria has super model loyalty.

Retail market share for the flagship Marlboro cigarette model has remained at over 40% for a few years. This permits the corporate to lift costs yearly and nonetheless preserve its buyer base intact.

Additionally, tobacco producers function an advantageous enterprise mannequin which doesn’t require intensive capital expenditures. Tobacco shouldn’t be a capital-intensive enterprise, due to economies of scale in manufacturing and distribution. That is why Altria generates sturdy free money move every year, whilst income has stagnated from falling smoking charges.

Such sturdy free money move leaves a substantial amount of money accessible for shareholder returns, debt reimbursement, and funding in future development initiatives.

One other advantage of Altria’s enterprise mannequin is that it’s extremely immune to recessions. Cigarettes and alcohol gross sales maintain up very nicely throughout recessions, which retains Altria’s profitability and dividend development intact.

The corporate carried out strongly through the earlier main financial downturn, the Nice Recession of 2008-2009:

2008 earnings-per-share: $1.66
2009 earnings-per-share: $1.76
2010 earnings-per-share: $1.87

Altria grew its adjusted earnings-per-share in every year of the Nice Recession. This demonstrates the corporate’s potential to supply regular earnings development, even when the broader financial setting turns into more difficult.

Earnings-per-share additionally grew through the pandemic, which is simply one other instance showcasing the resilience of Altria’s enterprise underneath varied powerful financial environments and unsure buying and selling circumstances.

Given Altria’s publicity to recession-resistant merchandise, it ought to maintain up very nicely through the subsequent downturn.

Dividend Evaluation

Altria’s present annual dividend is $3.92 per share. With the corporate shares at present priced at $46, Altria has a excessive yield of 8.5%.

Given Altria’s outlook for 2024, diluted EPS is anticipated to be $5.06. Consequently, the corporate is anticipated to pay out roughly 78% of its EPS to shareholders within the type of dividends.

For the reason that firm has sturdy adjusted working firms revenue (OCI) margins, low CAPEX, little competitors, and a really vast moat, it may possibly afford to pay out a big portion of earnings safely. For its half, Altria has a goal payout ratio of about 80%.

Altria is a Dividend King, which is an elite group of shares which have every raised their dividend for 50 consecutive years or extra. This reveals Altria’s dependability as a dividend development inventory.

The dividend seems to be sustainable, and we estimate the corporate will proceed to develop the dividend at an annual development price of about 2% over the medium time period.

The 8.5% dividend yield may be very enticing for buyers who focus totally on revenue.

Last Ideas

Altria has elevated its dividend every year for over 5 many years, a extremely spectacular monitor document. It now faces uncertainty as a result of continued decline in smoking charges, nevertheless it has made investments to cope with the altering client panorama by increasing into new merchandise reminiscent of heated tobacco, e-vapor, and hashish.

The corporate can be counting on these segments to gas continued development within the years to return. Subsequently, the inventory appears very enticing for revenue buyers.

In case you are inquisitive about discovering high-quality dividend development shares and/or different high-yield securities and revenue securities, the next Certain Dividend assets can be helpful:

Excessive-Yield Particular person Safety Analysis

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