Is Altria Group Inc (NYSE:MO) An Attractive Dividend Stock?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 10 years, Altria Group Inc (NYSE:MO) has returned an average of 5.00% per year to shareholders in terms of dividend yield. Does Altria Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Altria Group
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is its annual yield among the top 25% of dividend-paying companies?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has the amount of dividend per share grown over the past?
Can it afford to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
Does Altria Group pass our checks?
Altria Group has a trailing twelve-month payout ratio of 47.80%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect MO’s payout to increase to 77.44% of its earnings, which leads to a dividend yield of 4.96%. However, EPS is forecasted to fall to $3.97 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Not only have dividend payouts from Altria Group fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Compared to its peers, Altria Group generates a yield of 4.04%, which is high for Tobacco stocks.
Next Steps:
Taking into account the dividend metrics, Altria Group ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental factors you should further examine:
1. Future Outlook: What are well-informed industry analysts predicting for MO’s future growth? Take a look at our free research report of analyst consensus for MO’s outlook.
2. Valuation: What is MO worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MO is currently mispriced by the market.
3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
