Sin stock investing, particularly when it comes to tobacco stocks, is an endeavor fraught with hurdles. Critics of the strategy frequently cite the social stigma of tobacco, as well as statistics showing the decline in smoking rates in the United States and the ire of the health-conscious consumer.
While all true, don’t be fooled: Altria Group Inc (NYSE:MO) isn’t going anywhere. The company behind Marlboro, in addition to many other brands, has pumped out profits and dividends for decades on end, and will continue doing so for many decades to come.
There’s something to be said for consistency
You’ll never see Altria Group Inc (NYSE:MO) featured in the financial media as the next great growth story. A centuries-old industry isn’t likely to be considered the sexy new investing idea.
At the same time, investors should consider Altria Group Inc (NYSE:MO)’s consistency a virtue. The company has a history that stretches back more than 180 years. Formerly the Philip Morris Companies, Altria slowly built a stable of successful brands. Its tobacco offerings include the juggernaut Marlboro brand. Through its acquisition of UST, Altria has smokeless tobacco brands, including Skoal and Copenhagen. Altria also owns Ste. Michelle Wine Estates, John Middleton cigars, and a sizable stake in brewing company SAB Miller.
Over the last century, Altria has held two core beliefs at the heart of its management strategy: steady profit growth, and strong dividend payments to shareholders. Those two elements are the major reason why Altria Group Inc (NYSE:MO) was the best-performing stock from 1925 to 2003, according to noted economist Jeremy Siegel.
Altria gives investors what they want
Despite calls for the tobacco industry’s imminent demise, Altria Group Inc (NYSE:MO)’s recent results only served to bolster the company’s reputation as one of the most consistent stocks your money can buy.
Altria’s second-quarter and first-half results were just what investors should expect. Altria grew its adjusted diluted earnings per share, which excludes special items, by 7.4% in the first half of the year. Moreover, the company revised its full-year 2013 outlook. For the full year, Altria expects adjusted diluted EPS to come in between $2.36 per share to $2.41 per share, representing 7% to 9% growth versus 2012.
As if that weren’t enough, Altria Group Inc (NYSE:MO) recently delivered yet another dividend increase, which long-term investors have come to expect. Altria bumped up its payout by 9%, and after the increase, the stock now yields an impressive 5.6% at recent prices. All told, Altria has increased its dividend 47 times in the last 44 years.
Not only that, the company announced it had expanded its share buyback authorization by $700 million, from $300 million previously to $1 billion. Management expects to complete the buyback program by the end of the third quarter 2014.