Altria's Stock, Dividends Rising Despite Challenges

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Tobacco maker Altria Group's stock price and dividend payout are rising despite challenges posed by smoking-related lawsuits and a decline in cigarette sales.

Altria Group 's ( MO ) most recent dividend increase was in August, when it boosted its quarterly payout by 9% to 48 cents a share. It was Altria's 47th dividend increase in the past 44 years.

The annual dividend yield is close to 5% at the current share price, far above the S&P 500 average of 1.87% and the highest among the three tobacco stocks in the IBD Income Investor screen. The others areLorillard ( LO ) andReynolds American ( RAI ).

Altria shares this year have risen nearly twice as much as the S&P 500.

Altria makes Marlboro and Virginia Slims cigarettes, Black & Mild cigars and smokeless tobacco under the Copenhagen and Skoal brand names.

The company has managed to increase earnings steadily despite worldwide anti-smoking campaigns and high litigation fees. It's done so in part by raising prices, cutting costs and introducing smokeless-tobacco products such as electronic cigarettes.

Quarterly profit growth has been remarkably stable, ranging from 4% to 14% since the start of 2010, with the exception of one quarter in which earnings were flat.

As a result, Altria has a five-year Earnings Stability Factor of 1 on a scale of zero (most stable) to 99 (most volatile).

In the first quarter, Altria reported a profit of 57 cents a share, up 6% from a year earlier. Sales were flat at $5.52 billion, as higher sales of smokeless products offset a decline in cigarette sales. Profit for the full year is expected to rise 8% to $2.57 per share, followed by a 7% increase in 2015.

Annual pretax margin was a robust 29.7% last year, the fourth straight increase and another factor in the company's ability to continue increasing its dividend.



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: Investing , Investing Ideas

Referenced Stocks: MO , LO , RAI

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