What’s better than an income-driven stock that increases its dividends on an annual basis? What about a stock that increases its dividend yield and its dividend growth every year?
That is the view of Bob Ciura of Real Money.
Ciura is looking for one dividend stock on the exclusive Dividend Kings list, with a track record of 50 consecutive years of dividend growth and a dividend yield of 7.2%.
That share is Altria Group (MA) – Get Report, which Cirua says is an “attractive stock” for income investors. Read more in Ciura’s column, This dividend king has a habit of delivering high yields.
This from Ciura:
“Altria is often associated with tobacco, but is actually a diverse consumer products company. The vast majority of its sales and profits come from its tobacco business. It manufactures cigarettes under the Marlboro brand, the most valuable brand that alone holds more than 40% of the US retail market share.
“In recent years, Altria has diversified its business model beyond tobacco by acquiring investment interests in companies that operate in multiple neighboring companies. For example, Altria owns 10% of beer giant Anheuser-Busch InBev (KNOB) – Get Report. It also invested $13 billion in vaping giant Juul Labs, and it separately invested $2 billion in Canadian cannabis producer Cronos Group (CRON) – Get Report.
Ciura also approves Altria’s switch to oral nicotine, especially with the $250 million acquisition of the remaining 20% of Switzerland-based Burger Söhne Group that it didn’t already own.
The acquired company produces the growing On! company, which continues to gain market share. In the first quarter, On!’s share of the oral tobacco category in stores with On! distribution was 3.1% for the 12 months ended March 31, an increase of 0.7% over the 12 months ended December 31.
Ciura notes that Altria is doing a solid job of generating revenue growth beyond tobacco, “which is becoming increasingly important as the number of domestic smokers continues to decline,” he says.
Altria is investing organically to prepare for a post-cigarette future, Ciura says. And its penchant for generating cash should also attract income-oriented investors — because that’s what solid dividend companies do.
As a tobacco company, Altria doesn’t have a fast-growing runway. Instead, what makes Altria so valuable to investors is its ability to generate cash and return cash to shareholders at such a high rate. Thanks to Altria’s huge cash flow, the company is more than equipped to increase its dividend payout each year, Ciura writes.
“Altria is a shareholder-friendly company. With high cash flow and a target dividend payout ratio of 80%, we consider Altria’s dividend to be very safe,” said Ciura.