Altria Shows Strength Despite Falling Sales, Lawsuits


Altria Group ( MO ), the largest U.S. tobacco producer, has retaken its 50-day moving average as it works on a possible new base.

The maker of Marlboro cigarettes has battled back despite head winds such as smoking-related lawsuits, falling cigarette sales and a disappointing Q2 earnings report.

The stock is up 10% this year, easily outpacing the S&P 500, and is just 3% below a new high.

Furthermore, Altria has boosted its dividend 47 times in the past 44 years. The last increase was declared in August 2013, a 9% hike to 48 cents a share. The annual dividend yield is a little under 5% at the current share price, far above the S&P 500 average of 1.94%.

Altria last month reported that Q2 profit rose 5% to 65 cents a share, just below analysts' expectations. Revenue slipped 1% to $6.26 billion.

The company is trying to offset a long-term slide in cigarette sales by raising prices and expanding smokeless offerings such as chewing tobacco and electronic cigarettes. E-cigarettes are seen as a safer alternative to tobacco, but they're also coming under regulatory scrutiny.

On July 19, Altria rivalReynolds American ( RAI ) was ordered to pay $23.5 billion in damages to the widow of a smoker who died from lung cancer. The amount is expected to be reduced on appeal.

The verdict came days after Reynolds announced plans to buyLorillard ( LO ) to create the second-largest U.S. tobacco company behind Altria.

Yet all three stocks reacted negatively to the takeover news, and both Reynolds and Lorillard remain below their 50-day lines.

Despite the head winds, all three companies remain boast unusually stable profits. Altria has a five-year Earnings Stability Factor of 1 on a scale of zero (most stable) to 99 (most volatile). Its annual pretax margin is also strong and rising, boding well for future dividend hikes.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: MO , RAI , LO

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