Altria is on sale with its 5.7 percent yield

Marlboro Display

Altria Group, Inc. is widely known for its Marlboro cigarettes. Nevertheless, in the investing community Altria is most commonly known for its attractive dividends and shareholder pleasant policies. The present Altria is what remains of a much greater firm. The old Altria spun off Philip Morris International, which regulates the Marlboro cigarette brand outside of the US, on March 28, 2008. On March 30, 2007 Altria spun off Kraft. As shareholders of these spin-offs can attest, they have carried on Altria’s shareholder friendly policies.

Altria is at the moment trading for $30.49 as of November 16, 2012. The latest dividend is $0.44 a share, which results in a yield of 5.77 percent.

Altria has been continuously increasing its dividend. The firm has focused dividend payout ratio of around 80% of adjusted earnings per share.

Altria has also been steadily repurchasing stock and minimizing its number of shares outstanding. The quantity of shares as of the end of third quarter of 2012 was 2.024 billion. This is a decline of 60 million from the 2.084 billion shares outstanding at the end of the third quarter of 2011.

In addition to its cigarette business, Altria is the owner of a 27.1 percent interest in SABMiller. This stake gives Altria with around $472 million per year of dividend revenue or around $118 million per quarter. Thisrevenue  is separate and in addition to Altria’s net earnings.

For the third quarter of 2012 Altria revealed EPS of $0.32. This is a decrease from the $0.60 of EPS Altria revealed for the second quarter of 2012. EPS has been determined by charges because of the retirement of older high interest debt.

The dividend payout ratio using EPS has average 99 percent for the 8 quarters since Q4 of 2010.

Nevertheless, if you put the income offered by the SABMiller holdings to EPS you will get a much more average payout ratio of 87 percent.

Altria’s total debt at the end of Q3 of 2012 was $13.88 billion. This is a small raise from the $12.20 billion of total debt at the end of Q3 of 2012. Interest expense for the Q3 of 2012 was $278 million, a decline from the $282 million for the Q3 of 2011. Interest expense is supposed to decrease even more, since Altria has been changing older high interest debt with newer low interest debt.

Altria is a best in breed dividend paying stock with its present 5.7 percent yield and commitment to raising shareholder returns through dividend increases and stock buybacks. It is a worthy of a spot in any revenue seeking portfolio.


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