Realty Income vs. Altria: The Ultimate Dividend Showdown

Investors seeking high-yielding stocks with strong dividend growth should consider two heavyweights: Realty Income (O) and Altria Group (MO). Both companies have impressive track records and offer attractive dividends, but which is the better choice for long-term income investors? Let's dive into the details and compare these two powerhouses.

Dividend Yield and Growth

Altria boasts a higher dividend yield of approximately 7.2% compared to Realty Income's 5.5%. However, Realty Income has increased its payout 127 times since its IPO, while Altria has raised its dividend for 54 consecutive years. Realty Income's dividend growth has been steady at a CAGR of 5%, while Altria's growth has been more robust at 8% CAGR.

Company	Dividend Yield	Dividend Growth (CAGR)
Realty Income	5.5%	5%
Altria	7.2%	8%

Business Model and Risks

Realty Income is a retail REIT, owning and leasing commercial properties to tenants. Its diversified tenant base and triple net lease structure provide a stable income stream. Altria, on the other hand, is the largest tobacco company in the US, facing existential challenges due to declining smoking rates and increased competition from e-cigarettes.

Realty Income's occupancy rates have remained consistently high, while Altria's cigarette shipments and market share have declined. Realty Income's lower risk profile and stable business model make it a more secure choice for long-term income investors.

Valuation and Performance

Realty Income is currently trading at around 15x last year's AFFO per share, offering a reasonable entry point. Altria is trading at just 10x last year's earnings, suggesting it may be more undervalued. However, Realty Income's forward yield of 5.4% and projected EPS growth make it an attractive option for long-term investors.

Company	Valuation (P/E or AFFO)	Forward Yield	Projected EPS Growth
Realty Income	15x	5.4%	6%
Altria	10x	7.2%	5%

Realty Income vs. Altria comparison chart

In conclusion, both Realty Income and Altria offer attractive dividend yields and growth histories. However, Realty Income's lower risk profile, stable business model, and reasonable valuation make it the better long-term income investment. While Altria's higher yield and potential undervaluation are enticing, its existential challenges and slower projected EPS growth may pose greater risks to investors. Ultimately, the choice depends on an investor's risk tolerance and investment horizon.