Recent buy #3 – Altria Group (MO)

Bought 20 shares of Altria Group (MO) for 51$. Total cost – 1.020$. Annual dividend inome – 42 EUR (47$). Yield on cost – 4,6%.

So after purchase of oil companies and REITs my eye was caught by another group that pays massive dividends – tobacco companies. And two of them are dominating DGI folk portfolios – PM and MO. Made a quick comparison and decided to go for the second one.

Altria_RGB

Altria Group (MO) – one of tabacco giants with annual revenue near 20 bn$ and Net income 7 bn$. Company is not only into tabacco but also diversified a bit with exposure in wine, beer and cannabis products. Company owns PM US, while PM control sales in other parts of the globe. MO invest heavy into cigarette alternatives – evaping, icos, On! and many. If you quit smoking traditional cigarettes it is very likely that you end up using other MO products.

On to company financials! Top line looks to be growing altough not very high growth by lower single digit growth. Bottom line if we exclude the tax and other one-off also quite stable. With EPS ~4$ purchase price of 51$ landinds at P/E ~13x, which is quite good and looks to be not overpriced in this crasy market. Dividends of 3,36$ (0,84×40) lead to high payout ratio ~80%. But this is the reason for very high dividend yield 6,6% (before tax). 5y average dividend growth quite nice +10%. Last increase from 0,8$ to 0,84$ represents a dividend growth +5%, so it has declined a bit over past few years, but im ok with such a high initial yield. Company paid increasing dividends for the past 50 years so the company is a Dividend king thus dividend freeze or cut is very likelly. Equity ~20% bit low but way better then negative equity of PM (main reason why I pick MO vs. PM). With EBITDA of 10,2 bn$ and NetDebt 26 bn$ (28-2) Leverage ~2,5x looking also good.

I know I know my portfolio is getting more and more dirty with investments in oil and now in smoking industry, but these industries were here from the stone ages and I doubt that they will be gone in my lifetime. Transform and adapt, yes, this is what they are doing with investments in renewable energy and more healthy tabacco products like icos 😉

This investment has boosted our projected annual income to 800 EUR. Another great milestone and just 20% from our first 1 kEUR annual dividend income mark. This year dividend income should jump to new high never seen before 🙂

What is your view on MO?

4 thoughts on “Recent buy #3 – Altria Group (MO)

Add yours

  1. Nice article! I have checked this stock several times but somehow I never pulled the trigger. I guess it’s bothering me that it’s mainly a US play.

    I am sure that you will enjoy the juicy dividends!

    Like

    1. Thanks man, high dividend is just too good and company continue grow both revenue and EPS. Yes this is US activity only but you have to take into consideration that malboro and icos that is sold by PM at the end is owned by MO. This is why PM is sort of subordinated company.

      Liked by 1 person

  2. It may be attractive as an investment, but it’s definitely not attractive ethically. You’ll be making money out of burning peoples lives.

    It same as McDonald’s. Its a great defensive stock but my moral doesn’t allow me to buy it.

    Like

    1. Hi Tony. Yes your tottaly right, same goes for KO and PEP, but hey should I be the one to blaim that homo sapiens has bad habits since stone age 😀 also im troling my colegues at work who smoke that they are earning me money 🙂 Personaly I dont smoke, so its not my fault they do. I made small experiment on my work colegues and mos of them smome PM brands, more “advanced” icos. I jocked if they were to quit they will probably start using on! And they cannot run away from earning me (Altria) money 🙂 I think that people are responsible for them selves and I should not not invest in oil companies, tabbaco, fast food just because its “unethical”. I think its unethical to think that if you polute your planet with gasoline cars, kill yourself with smoking, drinking or eating junkfood and you think that this is somebody elses fault (companies > their shareholders > me). I dont think so 🙂

      Like

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