High Dividend 50: Altria Group – Sure Dividend

Up to date on Might 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 just ~1.4%.

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

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

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

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

Subsequent on our checklist of excessive dividend shares to assessment 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 increase the dividend for therefore 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 below a wide range 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).

Nearly all of Altria’s income and revenue continues 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 a long time, 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 progress faces an unsure future attributable to altering client habits.

As a serious tobacco firm, Altria has to face the fact of declining smoking charges in the US. Annually, there are fewer cigarette people who smoke within the U.S. In consequence, there are fewer prospects for tobacco corporations like Altria.

The entire {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. Thus far, this has labored to offset misplaced income. Altria will proceed to boost costs within the years to return.

However nonetheless, tobacco corporations should adapt to the brand new atmosphere, 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 could possibly be two main long-term progress catalysts going ahead.

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

The corporate can even be capable of generate earnings-per-share progress by price 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 progress for Altria’s earnings-per-share over the following 5 years.

Aggressive Benefits & Recession Efficiency

Altria advantages from a large number of aggressive benefits, which have allowed the corporate to generate regular progress over a long time. 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 boost costs yearly and nonetheless hold its buyer base intact.

Additionally, tobacco producers function an advantageous enterprise mannequin which doesn’t require intensive capital expenditures. Tobacco just isn’t a capital-intensive enterprise, due to economies of scale in manufacturing and distribution. Because of this Altria generates robust free money circulate annually, whilst income has stagnated from falling smoking charges.

Such robust free money circulate leaves an excessive amount of money accessible for shareholder returns, debt reimbursement, and funding in future progress initiatives.

One other good thing about Altria’s enterprise mannequin is that it’s extremely proof against recessions. Cigarettes and alcohol gross sales maintain up very nicely throughout recessions, which retains Altria’s profitability and dividend progress 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 annually of the Nice Recession. This demonstrates the corporate’s capacity to provide regular earnings progress, even when the broader financial atmosphere 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 below 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 the moment priced at $46, Altria has a excessive yield of 8.5%.

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

Because the firm has robust adjusted working corporations revenue (OCI) margins, low CAPEX, little competitors, and a really huge moat, it may well 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 exhibits Altria’s dependability as a dividend progress inventory.

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

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

Ultimate Ideas

Altria has elevated its dividend annually for over 5 a long time, 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 shall be counting on these segments to gasoline continued progress within the years to return. Due to this fact, the inventory appears very enticing for revenue buyers.

If you’re fascinated about discovering high-quality dividend progress shares and/or different high-yield securities and revenue securities, the next Certain Dividend assets shall be helpful:

Excessive-Yield Particular person Safety Analysis

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