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I’ve recommended it to income investors for years.
I’ve held it in my investment portfolio for nearly as long.
I refer to the snowflake-offending, politically exploited Altria Group (NASDAQ: MO), the company behind the Marlboro, Skoal, and Copenhagen brands.
But there’s more to the company than tobacco.
Altria owns 10.1% of Anheuser-Busch InBev (NYSE: BUD), the world’s largest beer brewer. It owns a 35% interest in Juul, the dominant e-vapor product. It owns 45% of Cronos Group (NASDAQ: CRON), a global cannabis company headquartered in Toronto.
If we could add cigars and wine to the mix, we’d approach the near-perfect vice company.
And we can. Altria sells John Middleton cigars and Ste. Michelle Wine Estates wine.
Altria offers something to offend just about anyone who is inclined to be offended. That fact alone warms my cockles and kindles my sympathies.
But we’re investing. Best to shelve the emotion and focus our clinical eye on the numbers.
The dividend numbers draw the eye immediately.
Altria pays a $3.36-per-share annual dividend, which has been increased every year for the past half-century. (The next increase occurs with the October quarterly payment.)
The annual dividend generates an impressive 8.3% yield. No other Dividend Aristocrat’s dividend yield is close.
The enticingly high yield is the product of continual dividend growth . . . and a falling share price. Altria shares are down 16% year to date.
The Carrie Nations of the world have set their sights on the nascent vaping market. The market is in the midst of a full political assault.
President Trump is contemplating legislating Draconian restrictions on the vaping practice. New York governor Andrew Cuomo recently instituted an emergency ban on flavored vape products.
Altria’s rising political risk motivated Philip Morris International (NYSE: PM) to abandon merger talks with Altria. The two had planned to become one (as they were pre-2008).
It appears as though Altria has been hit with the perfect storm. That’s good news for new investors. Perfect storms have historically produced perfect times to invest.
Altria and the other tobacco giants were swamped by a wave of uncertainty created by a relentless lawsuit storm in the 1990s. The storm abated on the massive 46-state, $206-billion Tobacco Master Settlement Agreement signed in November 1998.
A lot of money had to be paid, but the uncertainty fears had been calmed. From a lowly $19, Altria’s share price soared to a lofty $90 by 2008. At that point, the company split itself.
History might not repeat, but I like the odds of it rhyming (apologies to Mark Twain). There’s still a lot to like about Altria.
iQOS is one thing to like. The product heats but does not burn tobacco. The technology has been approved by the Food and Drug Administration (FDA), and iQOS is faring well internationally under Philip Morris’ guidance. Altria will sell iQOS in the United States.
Altria assumed control of Juul this week. K.C. Crosthwaite, Altria’s chief strategy and growth officer, has been promoted to CEO. A savvy tobacco veteran leading Juul extends an olive branch to the FDA. It signals Juul’s willingness to work with regulators.
And let’s not overlook what’s most important – making money. Altria continues to make a lot of it.
Management recently upped the earnings guidance to the range of $4.19 to $4.27. Previous guidance offered a $4.15-to-$4.27 range.
Altria shares are priced at only 9.5 times full-year earnings estimates. They’re priced to offer an immediate 8.3% dividend yield.
Those two facts alone are reason enough to at least like the investing opportunity.