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Altria (MO) Rewards Shareholders with 8.3% Dividend Hike

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The board of cigarette maker Altria Group, Inc. (MO) has announced a quarterly dividend hike of 8.3% to 52 cents per share. The new dividend will bepayable on Oct 10, 2014 to shareholders as of Sep 15. The new raise brings the annualized dividend rate to $2.08 per share and a dividend yield of 4.9% based on Altria’s closing price of $42.58 on Aug 21, 2014.  Last year, the company increased its dividend by 9.1%.

Altria regularly returns value to its shareholders. Since the spin off of Philip Morris International Inc. (PM) in 2008, Altria increased its dividend every year. Moreover, the company has increased its dividend 48 times in the last 45 years. The company has a dividend payout ratio target of around 80% of its adjusted earnings per share.  

Apart from the dividend hike, the company also regularly repurchases shares. During the second quarter of 2014, Altria repurchased approximately 3.3 million shares for approximately $132 million. Altria also announced that it will enhance its share buyback plan by $700 million to $1 billion in a year from the current annual buyback plan of $300 million i.

The recent dividend hike and enhanced share buyback program reflects the company’s strong cash position.

In Jul 2014 Altria reported its second-quarter earnings of 65 cents per share in line with the Zacks Consensus Estimate. The results, however, exceeded the prior-year quarter’s results by 4.8%, backed by strong performance of the core tobacco business and leading premium brands

Altria Group, like its peers Lorillard Inc. (LO) and Reynolds American Inc. (RAI), is diversifying its product portfolio due to volume declines in cigarette industry. Smokeless products and e-cigarettes are the key product categories in which these companies are focusing now.

Altria has a Zacks Rank #3 (Hold).

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