The Most Important Challenge For Altria And Its Investors

Summary:

  • Altria’s transition to smoke-free products is crucial for sustaining its high dividend yield and long-term shareholder returns amid declining smokeable tobacco sales.
  • Despite recent stock price gains and dividend increases, the success of Altria’s SFP transition remains uncertain and requires close monitoring by investors.
  • Altria’s SFP revenue needs to grow significantly to offset the decline in smokeable products, with a target of $5 billion in SFP revenue by 2028.
  • Investors should watch for signs of a faltering transition, such as payout ratios exceeding 80%, delayed dividend increases, halted share buybacks, and declining stock prices.

Having a quick vape between meetings

Yuri_Arcurs/E+ via Getty Images

Introduction

The vast majority of Altria Group (NYSE:MO) investors are motivated by one objective: High and growing income supported by sustainable cash flows and profits. With an almost 8% yield, 55 years of dividend increases and predictable quarterly

H1 2022

H1 2023

H1 2024

Volume (millions)

43993

39740

35227

Revenue (million $)

11138

10910

10401

Operating inc. (million $)

5311

5401

5278

Adjusted margin

59.3%

60.4%

61.0%

H1 2022

H1 2023

H1 2024

Volume (millions)

402

395

385

Revenue (million $)

1278

1308

1362

Operating inc. (million $)

837

859

886

Adjusted margin

68.8%

68.7%

67.5%


Analyst’s Disclosure: I/we have a beneficial long position in the shares of MO either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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