Up to date on September twelfth, 2023 by Bob Ciura
Buyers on the lookout for shares with lengthy histories of dividend progress ought to take a better take a look at the Dividend Kings. This elite group of shares have the longest streaks of annual dividend will increase. The Dividend Kings have every raised their dividends for at the least 50 consecutive years.
To be a Dividend King, an organization will need to have a powerful enterprise mannequin with aggressive benefits, together with the power to navigate recessions. It needs to be no shock that we think about the Dividend Kings to be among the many highest-quality dividend shares in your entire inventory market.
We created a full record of all 50 Dividend Kings, together with essential monetary metrics reminiscent of dividend yields, payout ratios, and price-to-earnings ratios. You may obtain the total record by clicking on the hyperlink under:
Altria lately elevated its dividend by 4%, representing its 58th dividend enhance previously 54 years. Altria enjoys quite a few aggressive benefits, which have allowed the corporate to boost its dividend for therefore lengthy.
With a excessive dividend yield of 8.8%, we view Altria inventory as a beautiful possibility for earnings buyers.
Altria sells cigarettes, chewing tobacco, cigars, e-cigarettes, and extra beneath quite a lot of manufacturers, together with Marlboro, Skoal, and Copenhagen, amongst others.
The corporate additionally has a ten% fairness stake in Anheuser-Busch InBev (BUD), a 35% stake in e-cigarette maker JUUL, and a forty five% stake within the hashish firm Cronos Group (CRON).
Associated: 2023 Tobacco Shares Record | The 6 Finest Now, Ranked In Order
Smokeable tobacco merchandise nonetheless comprise the overwhelming majority of Altria’s income and revenue. The Marlboro model nonetheless instructions a number one market share within the U.S. market.
Supply: Investor Presentation
Over the previous a number of many years, this has served the corporate (and its shareholders) extraordinarily effectively. Altria has elevated its dividend for 54 years in a row. Whereas excessive dividend yields are routine amongst tobacco shares, no firm has as lengthy of a dividend enhance streak as Altria.
On August 1st, 2023, Altria reported second-quarter outcomes. Its adjusted diluted earnings per share got here in at $1.31, up 4% year-over-year, whereas its web revenues declined by 0.5% year-over-year.
Administration reaffirmed its 2023 full 12 months steering vary of adjusted diluted earnings per share of between $4.89 and $5.03, reflecting a possible progress vary of 1-4% year-over-year.
Altria’s future progress faces a cloudy future on account of altering shopper habits.
As a serious tobacco firm, Altria has to take care of the truth of declining smoking charges in the US. Annually, there are fewer cigarette people who smoke in the united statesand, due to this fact, fewer clients for tobacco giants like Altria.
In its most up-to-date quarterly outcomes, the corporate reported that its smokeable merchandise section recorded a home cigarette cargo quantity decline of 10% in comparison with final 12 months when adjusted for commerce stock motion.
Supply: Investor Presentation
Traditionally, tobacco producers compensated for falling smoking volumes with pricing will increase. This has been a profitable tactic to offset misplaced income, and Altria will proceed to boost costs within the years to come back.
However in the end, tobacco firms should adapt to the brand new setting, and Altria is making ready for a post-cigarette world by investing closely within the improvement of non-combustible merchandise.
Altria has invested closely in non-combustible merchandise, reminiscent of its $13 billion funding in e-cigarette chief JUUL and its $1.8 billion funding in Cronos. E-vapor and hashish might be two main long-term progress catalysts going ahead.
Altria additionally acquired Swiss firm Burger Söhne Group, to commercialize its on! oral nicotine pouches. Oral tobacco is a progress space for Altria, as customers who’ve stop smoking more and more shift to oral tobacco merchandise.
Supply: Investor Presentation
Lastly, Altria is aggressively increasing its personal e-cigarette model IQOS. Development from these new merchandise will assist Altria to proceed rising income within the years forward, at the same time as smoking charges hold falling.
The corporate may even be capable of generate earnings-per-share progress by price reductions and share repurchases. In all, we count on ~1.7% compound annual progress in Altria’s earnings-per-share over the following 5 years.
Aggressive Benefits & Recession Efficiency
Altria advantages from numerous aggressive benefits, which allowed the corporate to generate regular progress over so a few years. Before everything, Altria has great model loyalty. The retail market share for the flagship Marlboro cigarette model has remained excessive for a few years. This affords the corporate the power to boost costs yearly and never lose clients.
Second, tobacco producers function an advantageous enterprise mannequin which doesn’t require intensive capital outlays. Tobacco isn’t a capital-intensive enterprise, due to economies of scale in manufacturing and distribution. This is the reason Altria generates sturdy free money stream annually, at the same time as income has stagnated from falling smoking charges.
Such sturdy free money stream leaves loads of money out there for shareholder returns, debt compensation, and funding in future progress initiatives.
One other good thing about Altria’s enterprise mannequin is that it’s extremely proof against recessions. Cigarettes and alcohol gross sales maintain up very effectively throughout recessions, which retains Altria’s profitability and dividend progress intact. The corporate carried out strongly throughout the earlier main financial downturn, the Nice Recession of 2008-2009:
- 2008 earnings-per-share: $1.66
- 2009 earnings-per-share: $1.76
- 2010 earnings-per-share: $1.87
Altria grew its adjusted earnings-per-share in annually of the Nice Recession. This demonstrates the corporate’s capability to provide regular earnings progress, even when the broader financial setting turns into tougher.
Given Altria’s publicity to recession-resistant merchandise, it ought to maintain up very effectively throughout the subsequent downturn.
Valuation & Anticipated Returns
Primarily based on the anticipated 2023 earnings-per-share of $4.96, Altria inventory trades for a price-to-earnings ratio of 9.0, in contrast with our honest worth estimate of 11.0.
Because of this, Altria inventory seems to be undervalued, which may end in constructive returns from an increasing valuation a number of. If Altria’s P/E ratio rises from 9 to 11 over the following 5 years, shareholder returns could be boosted by 4.1% per 12 months.
As well as, we count on 1.7% annual earnings-per-share progress by 2028, which can additional enhance shareholder returns.
Lastly, Altria has a excessive dividend yield of 8.8%, making the inventory very enticing for buyers who focus totally on earnings. The dividend seems to be secure, as the corporate maintains a payout ratio of 79% of its annual adjusted earnings-per-share.
Taken collectively, Altria inventory has whole anticipated returns above 14% per 12 months over the following 5 years. With a excessive anticipated charge of return above 10% per 12 months, we charge Altria inventory a purchase.
On the subject of dividend shares, Altria is about as regular as they arrive. It has elevated its dividend annually for over 5 many years, a extremely spectacular efficiency.
The corporate faces uncertainty because of the continued decline in smoking charges, however Altria has deliberate for the altering shopper panorama by investing in new merchandise reminiscent of heated tobacco, e-vapor, and hashish. These adjoining classes will gasoline continued progress for years to come back.
Altria inventory additionally seems to be undervalued, that means proper now’s an opportune time to purchase shares. The excessive dividend yield of 8.8% is comparatively safe. General, the inventory appears very enticing for worth and earnings buyers.
Associated: Tips on how to Dwell Off Dividends In Retirement
The next articles comprise shares with very lengthy dividend or company histories, ripe for choice for dividend progress buyers:
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