MO - Why Altria's Kingly Yield Is as Good as It Looks
Altria Group (NYSE: MO) shares have been beaten down recently because of a downgrade from Morgan Stanley. However, the company remains profitable and financially stable. But even with its dividend hovering around a suspiciously high 7.3%, the company boasts several key strengths that position it well to keep up those payouts for the forseeable future.
Altria maintains a strong competitive advantage in the cigarette space. Its Marlboro brand has been the top-selling cigarette brand for 45 years. Currently, 90% of Altria's revenues come from tobacco products, but it's also pursuing alternative nicotine products to offset the decline in tobacco usage. It owns equity stakes in Juul (vaping) and Cronos (cannabis) (NASDAQ: CRON) , as well as a 10% stake in Anheuser Busch InBev (NYSE: BUD) that's worth roughly $11 billion.
Altria has been seemingly slow to move in its transition to smokeless tobacco products, despite its competitive advantage in cigarettes and its tag line of "Moving Beyond Smoking." That aside, the company does have a plan to transition to a smoke-free future by 2030; at the moment, those efforts primarily rely on distribution agreements or equity ownership. Altria has been making progress on this front: Its U.S. Smokeless Tobacco Company is the most profitable in the moist smokeless varieties, anchored by the Copenhagen snuff brand.
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Why Altria's Kingly Yield Is as Good as It Looks