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Up to date on September twelfth, 2023 by Bob Ciura
Traders on the lookout for shares with lengthy histories of dividend development ought to take a better have a look at the Dividend Kings. This elite group of shares have the longest streaks of annual dividend will increase. The Dividend Kings have every raised their dividends for not less than 50 consecutive years.
To be a Dividend King, an organization should have a powerful enterprise mannequin with aggressive benefits, together with the flexibility to navigate recessions. It ought to be no shock that we contemplate the Dividend Kings to be among the many highest-quality dividend shares in the whole inventory market.
We created a full checklist of all 50 Dividend Kings, together with essential monetary metrics corresponding to dividend yields, payout ratios, and price-to-earnings ratios. You’ll be able to obtain the total checklist by clicking on the hyperlink beneath:
Altria just lately elevated its dividend by 4%, representing its 58th dividend improve prior to now 54 years. Altria enjoys quite a few aggressive benefits, which have allowed the corporate to boost its dividend for therefore lengthy.
With a excessive dividend yield of 8.8%, we view Altria inventory as a horny possibility for earnings traders.
Enterprise Overview
Altria sells cigarettes, chewing tobacco, cigars, e-cigarettes, and extra below a wide range of manufacturers, together with Marlboro, Skoal, and Copenhagen, amongst others.
The corporate additionally has a ten% fairness stake in Anheuser-Busch InBev (BUD), a 35% stake in e-cigarette maker JUUL, and a forty five% stake within the hashish firm Cronos Group (CRON).
Associated: 2023 Tobacco Shares Listing | The 6 Greatest Now, Ranked In Order
Smokeable tobacco merchandise nonetheless comprise the overwhelming majority of Altria’s income and revenue. The Marlboro model nonetheless instructions a number one market share within the U.S. market.
Supply: Investor Presentation
Over the previous a number of many years, this has served the corporate (and its shareholders) extraordinarily properly. Altria has elevated its dividend for 54 years in a row. Whereas excessive dividend yields are routine amongst tobacco shares, no firm has as lengthy of a dividend improve streak as Altria.
On August 1st, 2023, Altria reported second-quarter outcomes. Its adjusted diluted earnings per share got here in at $1.31, up 4% year-over-year, whereas its web revenues declined by 0.5% year-over-year.
Administration reaffirmed its 2023 full yr steerage vary of adjusted diluted earnings per share of between $4.89 and $5.03, reflecting a possible development vary of 1-4% year-over-year.
Progress Prospects
Altria’s future development faces a cloudy future on account of altering shopper habits.
As a significant tobacco firm, Altria has to cope with the fact of declining smoking charges in america. Every year, there are fewer cigarette people who smoke in the usand, subsequently, fewer clients for tobacco giants like Altria.
In its most up-to-date quarterly outcomes, the corporate reported that its smokeable merchandise section recorded a home cigarette cargo quantity decline of 10% in comparison with final yr when adjusted for commerce stock motion.
Supply: Investor Presentation
Traditionally, tobacco producers compensated for falling smoking volumes with pricing will increase. This has been a profitable tactic to offset misplaced income, and Altria will proceed to boost costs within the years to come back.
However in the end, tobacco corporations should adapt to the brand new surroundings, and Altria is getting ready for a post-cigarette world by investing closely within the growth of non-combustible merchandise.
Altria has invested closely in non-combustible merchandise, corresponding to its $13 billion funding in e-cigarette chief JUUL and its $1.8 billion funding in Cronos. E-vapor and hashish could possibly be two main long-term development catalysts going ahead.
Altria additionally acquired Swiss firm Burger Söhne Group, to commercialize its on! oral nicotine pouches. Oral tobacco is a development space for Altria, as customers who’ve stop smoking more and more shift to oral tobacco merchandise.
Supply: Investor Presentation
Lastly, Altria is aggressively increasing its personal e-cigarette model IQOS. Progress from these new merchandise will assist Altria to proceed growing income within the years forward, whilst smoking charges preserve falling.
The corporate may even have the ability to generate earnings-per-share development by way of price reductions and share repurchases. In all, we anticipate ~1.7% compound annual development in Altria’s earnings-per-share over the subsequent 5 years.
Aggressive Benefits & Recession Efficiency
Altria advantages from quite a few aggressive benefits, which allowed the corporate to generate regular development over so a few years. In the beginning, Altria has large model loyalty. The retail market share for the flagship Marlboro cigarette model has remained excessive for a few years. This affords the corporate the flexibility to boost costs yearly and never lose clients.
Second, tobacco producers function an advantageous enterprise mannequin which doesn’t require intensive capital outlays. Tobacco shouldn’t be a capital-intensive enterprise, due to economies of scale in manufacturing and distribution. This is the reason Altria generates sturdy free money circulation annually, whilst income has stagnated from falling smoking charges.
Such sturdy free money circulation leaves loads of money accessible for shareholder returns, debt reimbursement, and funding in future development initiatives.
One other advantage of Altria’s enterprise mannequin is that it’s extremely immune to recessions. Cigarettes and alcohol gross sales maintain up very properly throughout recessions, which retains Altria’s profitability and dividend development intact. The corporate carried out strongly through the earlier main financial downturn, the Nice Recession of 2008-2009:
- 2008 earnings-per-share: $1.66
- 2009 earnings-per-share: $1.76
- 2010 earnings-per-share: $1.87
Altria grew its adjusted earnings-per-share in annually of the Nice Recession. This demonstrates the corporate’s potential to provide regular earnings development, even when the broader financial surroundings turns into tougher.
Given Altria’s publicity to recession-resistant merchandise, it ought to maintain up very properly through the subsequent downturn.
Valuation & Anticipated Returns
Primarily based on the anticipated 2023 earnings-per-share of $4.96, Altria inventory trades for a price-to-earnings ratio of 9.0, in contrast with our truthful worth estimate of 11.0.
Because of this, Altria inventory seems to be undervalued, which might lead to constructive returns from an increasing valuation a number of. If Altria’s P/E ratio rises from 9 to 11 over the subsequent 5 years, shareholder returns could be boosted by 4.1% per yr.
As well as, we anticipate 1.7% annual earnings-per-share development by way of 2028, which is able to additional increase shareholder returns.
Lastly, Altria has a excessive dividend yield of 8.8%, making the inventory very enticing for traders who focus totally on earnings. The dividend seems to be protected, as the corporate maintains a payout ratio of 79% of its annual adjusted earnings-per-share.
Taken collectively, Altria inventory has complete anticipated returns above 14% per yr over the subsequent 5 years. With a excessive anticipated price of return above 10% per yr, we price Altria inventory a purchase.
Ultimate Ideas
With regards to dividend shares, Altria is about as regular as they arrive. It has elevated its dividend annually for over 5 many years, a extremely spectacular efficiency.
The corporate faces uncertainty as a result of continued decline in smoking charges, however Altria has deliberate for the altering shopper panorama by investing in new merchandise corresponding to heated tobacco, e-vapor, and hashish. These adjoining classes will gas continued development for years to come back.
Altria inventory additionally seems to be undervalued, that means proper now could be an opportune time to purchase shares. The excessive dividend yield of 8.8% is comparatively safe. Total, the inventory appears very enticing for worth and earnings traders.
Associated: How one can Reside Off Dividends In Retirement
The next articles include shares with very lengthy dividend or company histories, ripe for choice for dividend development traders:
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to [email protected].
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