3 Reasons to Buy Altria Stock Like There's No Tomorrow

In the ever-evolving landscape of the tobacco industry, Altria Group, Inc. (NYSE: MO) stands out as a beacon of stability and growth. With a strong and consistently growing dividend policy, strategic diversification initiatives, and a robust financial foundation, Altria presents a compelling case for long-term investors. Let's dive into three key reasons why buying Altria stock could be a game-changer for your portfolio.

1. Unwavering Dividend Growth

Altria's commitment to a strong and consistently growing dividend policy is a cornerstone of its appeal to investors. The company has established a progressive dividend goal that targets mid-single digits dividend per share growth annually. This commitment was evident in their recent actions, such as increasing the quarterly dividend by 4.1% to $1.02 per share in August 2024. This increase reflects a strong commitment to delivering shareholder value and providing confidence in consistent dividend growth.

In comparison, other companies in the tobacco industry may not have such a clear and progressive dividend growth policy. For instance, Philip Morris International, which was spun off from Altria, has a different dividend policy and market focus. Altria's focus on the U.S. market and its leading brands like Marlboro, which holds a 42% market share, allows it to maintain a strong financial position to support its dividend policy.

The implications for long-term investors are significant. Altria's consistent dividend growth provides a reliable income stream, which is particularly attractive in a low-interest-rate environment. The current TTM dividend payout for Altria as of October 24, 2024, is $4.08, with a dividend yield of 8.19%. This high yield, combined with the progressive dividend growth, makes Altria an appealing option for income-focused investors.

Moreover, Altria's financial resilience is underscored by its consistent dividend payments and share repurchase programs. In 2024, the Board approved a 4.1% increase in the quarterly dividend rate, reflecting a strong commitment to delivering shareholder value. The company's share repurchase activity, including the January 2024 program, demonstrates confidence in its financial stability and future prospects. Altria's ability to fund these initiatives through strategic asset sales, such as the ABI Transaction, speaks to its financial acumen and prudent capital management.

2. Diversification into Smoke-Free Products

Given the declining demand for cigarettes, Altria is implementing several strategic initiatives to diversify its revenue streams and mitigate risks associated with its core business. One key initiative is the expansion into smoke-free products. Altria's smoke-free portfolio includes ownership of U.S. Smokeless Tobacco Company LLC (USSTC), the leading global moist smokeless tobacco (MST) manufacturer, and Helix Innovations LLC (Helix), a rapidly growing manufacturer of oral nicotine pouches. Additionally, Altria owns equity investments in Anheuser-Busch InBev SA/NV (ABI), the world's largest brewer, and Cronos Group Inc. (Cronos), a leading Canadian cannabinoid company. These investments and acquisitions are part of Altria's strategy to diversify its revenue streams and position itself in growing markets.

For example, Altria's acquisition of NJOY, which is the first e-vapor products to receive market authorizations from the FDA for both tobacco and menthol variants, is a significant step towards expanding into the e-vapor market. However, NJOY is currently facing patent litigation with JUUL, which could impact its ability to continue operations. Despite this challenge, Altria continues to work on a product solution that addresses all of the patents at issue in the event the ITC’s decision is not rejected by the Trade Representative.

Altria's strategic investments in ABI and Cronos further diversify its revenue streams, showcasing a robust balance sheet that can support long-term growth and withstand market fluctuations. Altria's financial health is underscored by its consistent dividend payments and share repurchase programs. In 2024, the Board approved a 4.1% increase in the quarterly dividend rate, reflecting a strong commitment to delivering shareholder value. The company's share repurchase activity, including the January 2024 program, demonstrates confidence in its financial stability and future prospects. Altria's ability to fund these initiatives through strategic asset sales, such as the ABI Transaction, speaks to its financial acumen and prudent capital management.

3. Strong Financial Performance and Market Leadership

Altria's financial performance and market leadership are evident in its robust brand portfolio and strategic investments. The company's leading brands, such as Marlboro and Black & Mild, continue to dominate the U.S. tobacco market. Altria's wholly-owned subsidiaries include leading manufacturers of both combustible and smoke-free products, ensuring a diversified revenue stream.

Altria's 2028 Enterprise Goals offer more clarity on its aspirations to continue to lead in the U.S. tobacco space, maintain strong operating margins, generate earnings growth, steadily grow its dividend, and maintain a strong balance sheet. Altria's Enhanced Business Platform includes a Combustible Tobacco Portfolio, Smoke-free Tobacco Brands & Investments, and Complementary Assets. Altria's commitment to innovation is evident in its expansion into smoke-free products and heated tobacco ventures. Market challenges and regulatory pressures remain key concerns for Altria's future performance.



Conclusion

In conclusion, Altria Group, Inc. presents a compelling case for long-term investors seeking reliable income and growth. With a strong and consistently growing dividend policy, strategic diversification initiatives, and a robust financial foundation, Altria is well-positioned to navigate the challenges of the tobacco industry and deliver value to shareholders. As the company continues to innovate and diversify its revenue streams, investing in Altria stock could be a game-changer for your portfolio.