Altria Group Inc (MO)

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A Blue Chip Stock With a 9% Ultra-High Yield
By: 24/7 Wall St. | December 18, 2023

Yield stocks don’t grab many headlines during a period when the Magnificent Seven (Apple, Microsoft, Alphabet, Amazon.com, Nvidia, Tesla and Meta) are higher by 75% this year, compared to a 23% rise in the S&P 500. Why invest in any shares that might underperform the broader market? The answer is safety, stability and a yield much better than anything short of junk bonds in the broader bond market. (Here are the seven highest-yielding ‘Strong Buy’ Dividend Kings you can buy and hold forever.)

Altria Stock

Huge tobacco company Altria Group Inc. (NYSE: MO) has a yield of 9.4%. Altria stock does not move that much, either up or down. It is lower by 7% compared to the start of the year.
Altria’s revenue fell 4% to $6.3 billion in the most recent quarter. Net income was up sharply from $224 million to $2.2 billion. The 35% net income margin shows the leverage Altria has in making commodity products on which it can get a strong brand price. Almost all of its cigarette sales are under the Marlboro brand. According to BrandZ, that brand is the 30th most valuable in the world at $57 billion. Billy Gifford, Altria’s chief executive officer, commented about the most recent financial results: “Our highly profitable traditional tobacco businesses were resilient in a dynamic operating environment during the third quarter and first nine months, providing fuel for our business transformation and significant cash returns to our shareholders.”

Part of the Altria stock magic for yield investors is the $11 billion it has on its balance sheet. Altria does not need this money for operations because of its positive cash flow. That means the dividend is solid. The tobacco business may be out of favor, but, except for massive shareholders’ lawsuits in 1998, that cost the industry $246 billion.

Altria’s pitch to investors who are reluctant to invest in a company that makes a deadly product is that it is creating less deadly tobacco products. That is how it describes itself to Wall Street. It is what management calls “moving beyond smoking,” which makes it a “tobacco harm reduction company.” This means producing “smoke-free” tobacco products. Nevertheless, cigarettes drive Altria’s financials and will for many years.

Investors who are willing to ignore the effects of smoking get a huge and steady yield with Altria stock.

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