Tags: Altria | Dividend | Play | tobacco

Altria: A Tried and True Dividend Play

By    |   Tuesday, 26 Apr 2011 12:15 PM

Investors looking for dividend income can find a good candidate in Altria Group (MO), the country’s largest tobacco-product seller.

While many studies show the number of smokers is dropping, you can bet there will always be quite a few around. Altria has expanded, too, into smokeless products like Skoal, so the company will always have a solid revenue base.

Altria offers a juicy dividend yield of 5.82 percent, more than 1.5 times the yield on the 10-year Treasury note. Moreover, Altria has increased its dividend by 90 percent over the last four years alone.

Altria reported profits of $813 million in the first quarter, up 38 percent from $589 million a year earlier, and topping analysts’ estimates. Revenue rose 27 percent to $5.76 billion. Cost cuts and price increases made up for a dip in sales volume.

“Altria delivered solid financial results in the first quarter, as our businesses navigated through high unemployment, low consumer confidence and a competitive business environment,” Altria CEO Michael Szymanczyk said in a statement.

While Altria’s share of the overall cigarette market slipped to 50.2 percent from 50.9 percent a year earlier, Marlboro, the market’s top seller, saw its share climb to 42.7 percent from 42.4 percent. Two new versions of the cigarette helped sales.

Credit-Suisse analyst Thilo Wrede was impressed with the brand’s strength. "Marlboro volume increased 1.6 percent, and the brand gained … market share, while pricing was stronger than we had anticipated," he writes.

Analysts say Altria retains pricing power for its top brands, so it can raise prices further to achieve higher revenue, especially if the economy continues to rebound.

The company forecasts that earnings per share will come in somewhere between $2.01 and $2.07 for 2011 as a whole, which amounts to between a 6 percent and 9 percent gain from the $1.90 total for last year.

Earlier this month, Barclays Capital analysts raised its target price on Altria shares to $28 from $26 previously. Altria trades at around $26.

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Investors looking for dividend income can find a good candidate in Altria Group (MO), the country s largest tobacco-product seller. While many studies show the number of smokers is dropping, you can bet there will always be quite a few around. Altria has expanded, too,...
Altria,Dividend,Play,tobacco
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2011-15-26
Tuesday, 26 Apr 2011 12:15 PM
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