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We Wouldn't Be Too Quick To Buy Altria Group, Inc. (NYSE:MO) Before It Goes Ex-Dividend

Simply Wall St
·3 mins read

Altria Group, Inc. (NYSE:MO) is about to trade ex-dividend in the next four days. You can purchase shares before the 14th of September in order to receive the dividend, which the company will pay on the 9th of October.

Altria Group's next dividend payment will be US$0.86 per share. Last year, in total, the company distributed US$3.44 to shareholders. Based on the last year's worth of payments, Altria Group has a trailing yield of 8.0% on the current stock price of $43.07. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Altria Group

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Altria Group reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Dividends consumed 61% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Altria Group reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Altria Group has delivered 9.7% dividend growth per year on average over the past 10 years.

Get our latest analysis on Altria Group's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Altria Group? It's hard to get used to Altria Group paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Altria Group.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Altria Group. For instance, we've identified 2 warning signs for Altria Group (1 shouldn't be ignored) you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.