1. Altria Group Inc. (NYSE:MO)
Number of Hedge Fund Investors: 38
Altria Group Inc. (NYSE:MO) is one of the best high-yield dividend growth stocks to buy now according to hedge funds, with 54 years of consistent dividend increases. While Altria Group Inc.’s (NYSE:MO) Q1 results were weak, its guidance impressed the Wall Street. Altria Group Inc. (NYSE:MO) expects adjusted EPS in the period to come in between $5.05 to $5.17, representing a growth rate of 2% to 4.5% from a base of $4.95 in 2023. The midpoint of this guidance is more than the Wall Street consensus of $5.11. Analysts are also welcoming Altria Group Inc.’s (NYSE:MO) decision about selling $2.2 billion worth of its stake in AB InBev. Altria Group Inc.’s (NYSE:MO) management talked about share buyback program during latest earnings call:
“Moving to capital allocation. In March, we sold a portion of our investment in ABI and expanded our share repurchase program to $3.4 billion. In expanding our repurchase program, we implemented a $2.4 billion accelerated share repurchase program under which we received 46.5 million shares in March, representing 85% of the ASR program. These repurchases are reflected in our weighted average shares outstanding for the quarter. We expect to receive shares representing the remaining 15% of the ASR program by the end of the second quarter. After the completion of the ASR program, we anticipate having $1 billion remaining under the currently authorized share repurchase program, which we expect to complete by year end. Turning to ABI’s financial results, we recorded $165 million of adjusted equity earnings for the quarter, down 8.3%.
As a reminder, we use the equity method of accounting for our investment in ABI and report our share of ABI’s results using a one quarter lag. Accordingly, our first quarter adjusted equity earnings represent our share of ABI’s fourth quarter earnings. Following the ABI transaction, our ownership of ABI is approximately 8.1% with a tax basis of approximately $1.2 billion. We continue to view the ABI stake as a financial investment, and our goal remains to maximize long term value of the investment for our shareholders. Turning to other capital allocation activity, we paid approximately $1.7 billion in dividends and retired $1.1 billion of notes that came due in the first quarter, and as of March 31, our debt to EBITDA ratio was 2.1 times. [read the full earnings call transcript here].”
Altria Group Inc. (NYSE:MO) is expected to generate strong FCF until at least FY 2026 based on current estimates, and the management expects to dole out about $6.92 billion as of FQ1’24.
Andvari Associates stated the following regarding Altria Group, Inc. (NYSE:MO) in its first quarter 2024 investor letter:
“Our second example of a high-yielding security is the stock of Altria Group, Inc. (NYSE:MO). Before we get into the details of why we started a position in Altria, a brief history is in order. The company was formerly known as Philip Morris before rebranding to Altria in 2003. Cynically, the rebranding was to minimize the negative attention from its tobacco business. However, the company also owned Kraft Foods and Miller Brewing, so it was logical to reflect its status as a conglomerate. Since rebranding, Altria has slowly “de-conglomerated”. It spun out Kraft in 2007. It spun out Philip Morris International in 2008. In 2021, it sold its Ste. Michelle Wine Estates business. Finally, last month Altria announced it is selling part of its 10% ownership in Anheuser-Busch InBev (BUD)
Andvari has followed Altria since we began our investment career. Profitability is extraordinary and the business requires minimal capital expenditures. Despite the volume of cigarettes having steadily declined—a great thing for our population health—Altria has still managed to grow revenues and profits with regular price increases…” (Click here to read the full text)
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