Dividend Increase: Altria (MO)

Last week while I was away at the Grand Canyon (pics coming soon), one of my favorite companies, Altria (MO), announced their dividend increase of 8% from $0.565 to $0.61.  This marks 50 dividend hikes in the last 47 years for the company.  The increase was actually $0.005 higher than my top end expectation of a $0.04 increase. The new dividend yield on MO sits at 3.70% after the increase.

Let’s take a graphical look at the dividend history going back to 2008 (I didn’t feel like pulling prior data do to spin offs of Kraft and Philip Morris prior to 2008):

The average dividend increase from MO going back to 2008 has been 8.41%.  If you look at the quarterly dividend back in 2008 of $0.32 and fast forward to present day’s $0.61, you quickly realize your dividend income has almost doubled inside of an 8 year span, not bad for a boring company tobacco company.  That rate of growth on the dividend also falls in line with my expectations for dividend growth of my overall portfolio projections as well.  We’ll get to stock performance in a bit.

Some stats on MO:

Market Cap: $129 Billion

Profit Margin: 29.5%

Payout Ratio: 78.20%

Total Debt: 12.8 Billion

Total Cash:$819 Million

Operating Cash Flow: $5.62 Billion

You’ll notice that  high payout ratio of 78%.  That’s actually in line with the companies goal which targets an 80% payout ratio.  Normally that high a payout might be a concern, but since the industry is prone to lawsuits rather than keep the cash, kick it out to shareholders.

Now, lets take a look at MO vs S&P500 for the past decade.  You can easily see it’s not even close in terms of performance.  This doesn’t even factor in dividend reinvestments, just pure capital appreciation.

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MO is a stock that I will probably never sell and own for the rest of my life and is currently my single largest holding.  The capital appreciation is nice and steady, holds up during recessions, and that dividend and dividend growth is sexy.  It is one of my 5 stocks for a basic portfolio for beginners.  I expect more of the same next year regarding the dividend, approximately a $0.04 increase announced August 2017.  For those keeping score at home, this makes 30 of my holdings announcing increases for the year.

Look for a dividend increase announcement coming within the next couple weeks from PM.  I’m expecting a $0.05-$0.07 increase.

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