Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is Altria Group Inc (MO) a Buy?

Page 1 of 2

Noted Wharton economist Jeremy Siegel stated in his book The Future for Investors that Altria Group Inc (NYSE:MO), formerly Philip Morris, was the top performing stock from 1925 to 2003. When you analyze Altria’s business, it’s easy to understand why.

At the same time, the world is a different place than it was when Altria was in its prime. Detractors of investing in sin stocks will point to a number of factors that, they contend, are sure to mean the end of big tobacco.

Altria Group Inc

These fears are rolled in to the two primary reasons for why Altria shareholders have made so much money over these many decades. You’ll soon see that these two reasons are still largely intact, and as a result, make Altria just as much a buy today as it was decades ago.

Reason #1: High dividend yield, year in and year out

For decades on end, the company behind Marlboro cigarettes, one of the most valuable brands in the world, pumped out steady profit growth and returned a great deal of those profits through to shareholders. Like it or not, Altria’s history places it in the hall of fame of corporate America. Altria Group Inc (NYSE:MO)’s history stretches back more than 180 years, and for many of those years, Altria has paid a dividend to shareholders.

Of course, Altria isn’t the only tobacco company that pays a hefty dividend. Industry competitors include Reynolds American, Inc. (NYSE:RAI) and Lorillard Inc. (NYSE:LO).

Close peer Reynolds American has a wide variety of cigarette brands including Camel, Pall Mall, Winston, and Kool. While Reynolds American offers a hefty 5.3% dividend yield, the company hasn’t performed very well in recent years. Revenue has declined for two years in a row, with full-year 2012 sales dropping almost 3%. Even worse, diluted earnings per share fell almost 7% in 2012 year-over-year.

Lorillard is much smaller than Altria, with a market capitalization of $16 billion. The company manufactures the Newport and Kent brands, and in February reported decent, if unspectacular, full-year 2012 results. Revenue and diluted earnings per share increased 2.4% and 5.6%, respectively, and the stock offers a 5% dividend yield at recent prices.

Altria Group Inc (NYSE:MO), meanwhile, continued to prove why it’s one of the market’s premier slow-and-steady stocks in 2012. The company recorded 3.5% growth in full-year revenue and saw its diluted EPS jump 25% year over year.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!