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When you think Altria Group (NYSE: MO), you think tobacco. You think tobacco for good reason.
Altria Group’s tobacco arsenal is led by the mighty Marlboro brand. Marlboro dominates the cigarette market as few brands dominate a market.
Ask smoker what he smokes. You have a 45% chance that he’ll reply “Marlboro.”
When you think Altria Group, you think Marlboro. You should also think dividends, and, again for good reason.
Altria Group is a bona fide dividend aristocrat. Altria Group has increased its dividend every year for the past 49 years.
You could argue that Atria Group is more than dividend aristocrat. It’s the king of the dividend aristocrats. The latest dividend increase (a 14.3% increase) and a 5.2% dividend yield only fortify my argument.
Altria Group sells tobacco cigarettes in spades. It could soon be selling a different type of cigarette in spades.
Canada became the second country on the planet (Uruguay was the first) to legalize recreational marijuana. Canadians and marijuana tourists can now legally inhale a marijuana cigarette without feigning an ulterior motive, such as relieving imaginary pain for an imaginary ailment.
Canada went fully legal on marijuana today, Oct. 17.
A fully legalized marijuana market has infused investors with a gold-rush mentality for understandable reasons.
The Canadian recreational marijuana market is expected to record $4 billion in sales over the next 12 months. That’s only the start.
Medical marijuana is legal in 29 states in the United States. Recreational marijuana is legal in nine states. Given the tax revenue marijuana generates, legality is sure to spread. The federal government conferring country-wide legality within the five years is more likely than not.
Other Western countries are sure to follow. Germany and Australia are expected to emerge as leading markets. Marijuana sales worldwide are expected to reach $146.4 billion by 2025, according to Grand View Report.
Marijuana investing transcends the individual. Large institutions have leapt into the fray.
Constellation Brands (NYSE: STZ) is the most conspicuous leaper. The beer, wine, and liquor giant extended its investment portfolio to marijuana. Constellation invested $4 billion in Canadian cannabis company Canopy Growth (NYSE: CGC).
As for Altria Group, Toronto’s Globe and Mail reports that the cigarette giant is negotiating to buy a stake in Aphria (OTC: APHQF). The company, located in the Erie lakeside burg of Leamington, Ontario, produces and sells medical marijuana and cannabis oil.
Altria Group and Aphria shares spiked higher when the Globe and Mail report hit the wires last week.
The deal appears legit if the sources can be trusted. The sources told the Globe and Mail that Altria Group executives have met with Aphria’s leadership team several times. The most recent meeting occurred in Leamington last week.
If an Aphria investment is forthcoming, the investment will be small relative to Altria Group’s size. Aphria sports a $3.7 billion equity market cap compared with Altria Group’s $113 billion market cap.
But that could change soon enough. An Altria Group-Aphria alliance could lift both companies’ respective market caps higher.
Altria Group is a marketing machine. The company took a niche cigarette brand, one initially marketed toward women, and elevated it to the No. 1 cigarette brand in the world. Marlboro is the cigarette. Aphria would only benefit from Altria Group’s marketing prowess.
Aphria is the intriguing investment for growth investors. Altria Group should pique income-investor interest.
Altria Group faithfully grows earnings and dividends 8%-to-10% annually. The dividend has historically grown at a similar rate.
Altria Group generates earnings and dividend growth from markets where little growth exists. Imagine what Altria Group could do in a legitimate growth market.
Altria Group investors may not need to imagine much longer.
Marijuana is a legitimate growth market. An Aphria investment would be a legitimate investment for Altria Group to exploit the growth. An Aphria investment would be welcomed news for Altria Group investors.