America’s Greatest Dividend Posts Strong Earnings

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With a 5.8% yield, a rock-solid balance sheet, and products people are addicted to, what better dividend buy is there than Altria (NYSE: MO)? Add to this the fact that it has increased its dividend 61 times in the last 57 years. It also beat earnings expectations, raised its earnings outlook, and triggered a 6% two-day rise in its shares. Those shares are up 33%, while the S&P is up only 13%.

Altria’s revenue rose 1% to $6.1 billion, and EPS rose 7% to $1.51. CEO Sal Mancuso said, “Our strong performance through the first nine months and confidence in our full-year plan allowed us to raise our earnings guidance for the year.”

Altria likes to promote its “smokeless products,” which it calls Oral Tobacco Products. Investors can ignore that line of business. It produced $688 million in the quarter. Revenue from Smokeable Products was $5.4 billion. Altria owns the king of cigarette brands, which drives most of its revenue: Marlboro has a 40% share of U.S. domestic cigarette sales. The company would be a huge success if it only had that brand.

Some argue that several other very large companies have high yields. Another argument is that their businesses rely on the economy. That is certainly the case with UPS (which yields slightly below 7%). Its business suffers when the economy slows.

Kraft Heinz (yield at 6.7%) operates in a branded world in which many of its products have direct competition. That shows up in its stock price, which is down slightly this year. People also point to another company that relies on brands vulnerable to competition. General Mills (with a yield of about 7%) makes high-end dog food, cereal, and snacks. Its stock is down 28% this year.

From time to time, it has been said that Altria has a high dividend to draw shareholders who might be put off by the fact that its products kill people. On the other hand, the dividend may keep rising because it is a cash machine.

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