Tobacco powerhouse Altria Group (NYSE: MO) has long been a beacon for dividend-seeking investors, consistently delivering attractive payouts even amidst substantial legal battles. The addictive nature of its products has underpinned its ability to offer bountiful dividends, drawing stakeholders like bees to honey.
Despite the enduring allure of its core cigarette business, which has slowly dwindled over the years, prudent investors must scrutinize all facets of Altria’s operations before chasing the tantalizing dividends it serves.
Altria’s dividend potential
Altria currently shells out $3.92 per share annually as dividends, boasting a hefty dividend yield of 8.75% at its present valuation. This equates to an investment outlay of $11,430 to pocket $1,000 in yearly dividends.
Notably, this yield towers nearly sevenfold over the S&P 500’s unassuming average of 1.3%. The company has a track record of steadily upping its distributions since 2009, with the past instances of “dividend cuts” being offset by strategic spinoffs that have enriched investors. Altria’s dividend dynamism is particularly striking, bearing in mind the seminal Surgeon General’s report on smoking hazards that was released six decades ago. Despite the long-drawn ebb in smoking prevalence and the burdensome legal costs, Altria’s stock and dividends have soared magnificently over the years.
Nevertheless, a recent dip in revenue for 2023 coupled with further anticipated declines in 2024 paint a somber outlook for Altria. Missteps like its ill-fated foray into vaping through Juul and losses incurred from its cannabis investment in Cronos Group serve as cautionary tales for the company’s prospects.
Although Altria has redirected $2.75 billion into NJOY, a vaping outfit, for a potential turnaround, a failure to rekindle revenue growth could ultimately jeopardize the hefty dividends it currently showers upon investors.
Is Altria a prudent dividend investment?
Despite the lofty dividend yield, prospective investors should mull over the wisdom of pegging their hopes on Altria for steady payouts. Undeniably, the tobacco titan and its dividends have defied the odds and surged ahead in past epochs.
Yet, with revenue on a downward trajectory and an absence of a clear growth pathway delineated by management, it might be prudent to look elsewhere for dividends until Altria’s growth engine kicks back to life.
Would $1,000 in Altria Stock Be a Good Move?
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