Altria Declares Quarterly Dividend
- By Alberto Abaterusso
Altria Group Inc. (MO) announced May 18 its dividend for the second quarter of 2017. The tobacco giant will pay 61 cents per ordinary share to shareholders of record as of June 15.
Altria is one of the biggest producers and vendors of tobacco and cigarettes, holding well-known brands in its portfolio such as Marlboro, Chesterfield and Merit. Marlboro - the most-sold brand of cigarettes in the world- consistently holds a huge portion of the U.S. market.
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The company is also engaged in the production and marketing of smokeless products.
The American tobacco company is a loyal payer of quarterly dividends, backed by the sale of cigarettes and cigars, which make approximately 90% of total revenue and income from operations.
The dividend is backed by growth in first-quarter earnings and sales. The growth was mainly driven by higher tobacco prices that more than offset the decline in units shipped.
For 2017, analysts forecast the company will generate EPS of $3.28 on average, an 8.3% increase from 2016 EPS, ranging between a low estimate of $3.26 per share and a high estimate of $3.3 per share.
Source: Yahoo Finance
Revenue for 2017 is forecasted to come in at $19.76 billion on average, a 2.2% increase from 2016.
Source: Yahoo Finance
Average revenue estimates range between a low of $19.58 billion and a high of $19.89 billion.
With approximately $5.23 billion in cash on hand and total cash flow from operations of approximately $3.5 billion to $4 billion, Altria will have plenty of liquidity to sustain the dividend payment.
Altria Group is currently trading around $70.89, up 35 cents or 0.50% from the previous trading day. The stock is trading with a price-earnings (P/E) ratio of 9.59 and a price-sales (P/S) ratio of 7.6.
As of today, the majority of analysts surveyed recommend holding shares of Altria with a recommendation rating of 2.3 out of five.
The analysts' average target price per share is $73.64, a 3.8% upside to the current share price.
The stock has gained 5% year to date. Over the last 12 months, the share price ranged between a low of $60.82 and a high of $76.54. The stock is trading close to its 52-week high. Furthermore, if we multiply the average EPS forecast of $3.28 for 2017 by the forward P/E ratio of 19.87, we obtain a share price of $65.17, which is 8% lower than the current market value. Due to this valuation and since the stock is trading close to its 52-week high, Altria Group may currently look overvalued.
Investing in Altria is for income investors looking to secure a constant stream of dividend payments. Altria is a faithful dividend payer with a dividend yield of 3.46%. In addition, despite the mounting campaigns against smoking, tobacco sales continue to increase steadily, indicating the business does not know and will likely never know a crisis. As a result, investing in tobacco giants like Altria is a wise decision for dividend investors.
Disclosure: I have no positions in Altria Group.
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This article first appeared on GuruFocus.
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