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Altria's Stock, Dividends Rising Despite Challenges

By: Investor's Business Daily
Posted: 6/16/2014 5:13:00 PM
Referenced Stocks: MO;LO;RAI

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.