1. Altria Group, Inc. (NYSE:MO)
Dividend Yield as of June 25: 8.42%
Altria Group, Inc. (NYSE:MO) is a Virginia-based manufacturing company that specializes in the production of tobacco, cigarettes, and other nicotine products. Recently, the FDA approved the marketing of four of the company’s e-cigarette products after a thorough scientific review. This move is notable as it is the first time the agency has granted marketing orders for non-tobacco flavored vapor products through the premarket tobacco application process. The FDA stated that evidence from Altria showed these menthol-flavored products offer a significant benefit for adult smokers, encouraging complete switching from traditional cigarettes, which outweighs the risks, including the appeal to youth.
The tobacco habit among people has given the industry a golden ticket to steady profits. Despite the long-term drop in smoking rates in the US, the industry’s pricing power has kept the cash rolling in for years. Altria Group, Inc. (NYSE:MO) owns Marlboro, the top cigarette brand in the nation, commanding about 42% of the total retail market and a dominating 60% share of the premium segment. The company’s overall revenue for the first quarter of 2024 came in at $4.7 billion, which slightly fell by 0.9% from the same period last year.
Andvari Associates has given strong outlook for Altria Group, Inc. (NYSE:MO) in its first quarter 2024 investor letter. Here is what the firm has to say:
“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)
Altria Group, Inc. (NYSE:MO) currently offers a quarterly dividend of $0.98 per share. The company holds a 54-year streak of consistent dividend growth. With a dividend yield of 8.42% as of June 25, MO ranks first on our list of the best dividend aristocrat stocks.
Insider Monkey’s database of Q1 2024 indicated that 38 hedge funds owned stakes in Altria Group, Inc. (NYSE:MO), compared with 42 in the previous quarter. These stakes are collectively valued at over $823.3 million. Among these hedge funds, Harris Associates was the company’s leading stakeholder in Q1.
While we acknowledge the potential of MO as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than MO but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
