Shares are falling. Monetary TV is rolling out the “Markets in Turmoil!” headlines. Uncertainty abounds over how a lot President Trump’s tariffs will influence the U.S. economic system. Each the broader Nasdaq Composite and the big-tech heavy Nasdaq-100 indexes are actually down by greater than 12% from their early January peaks as traders take their cash out of higher-risk progress shares, additional fueling folks’s fears.
Not all shares are falling, although. In instances of uncertainty, traders are inclined to flee to security within the type of low-risk dividend-paying shares like Altria Group (NYSE: MO). The tobacco and nicotine large is up virtually 10% yr thus far and nonetheless sports activities a dividend with a 7% yield. With these info in thoughts, do you have to purchase Altria inventory with $1,000 proper now?
Begin Your Mornings Smarter! Get up with Breakfast information in your inbox each market day. Sign Up For Free »
Pricing energy and new nicotine classes
Altria is the father or mother firm of Philip Morris USA, which primarily sells cigarettes in america beneath an array of manufacturers together with Marlboro, its best-selling model by far. Whereas cigarettes are nonetheless smoked extensively, gross sales volumes within the U.S. have been declining for many years now, and so they proceed to. Within the fourth quarter, Altria’s cigarette gross sales quantity fell by about 8% yr over yr.
Regardless of that, Altria’s internet income after excise taxes grew by 1.6% year-over-year to $5.1 billion final quarter as the corporate boosted its costs on packs of cigarettes by greater than sufficient to make up for the misplaced gross sales. Its pricing energy has allowed it to maintain revenues rising within the face of quantity declines for a few years, whereas additionally rising revenue margins for the smokeables division. In 2024, smokeables working earnings grew 1.4% to $10.8 billion, making up the vast majority of Altria’s income. With a 60% working margin, the smokeables division is among the most worthwhile companies on the earth.
Over the long run, Altria plans to considerably develop its smoke-free division, which incorporates nicotine pouches, digital vaping, and probably different merchandise like heat-not-burn units. By 2028, administration needs to double gross sales of its smoke-free merchandise to $5 billion, which might be a large proportion of Altria’s present annual income of $20 billion. Nevertheless, the corporate is effectively behind rivals corresponding to Philip Morris Worldwide, the place smoke-free merchandise are shut to creating up 50% of total gross sales proper now. This shall be an essential section for traders to trace for the remainder of the last decade.
Capital returns and dividend progress
Altria’s underlying enterprise is extremely worthwhile, however it’s a low-growth market. The smoke-free merchandise section has some promise, however for now, it is a small a part of the operation. One of the best characteristic of this inventory for traders is perhaps administration’s capital return technique.
By way of a mixture of share repurchases and dividend hikes, Altria Group persistently grows its per-share payouts to shareholders yearly. Over the past 10 years, the variety of shares excellent has fallen by 14%, and buybacks accelerated in 2024. Its dividend per share steadily climbed, and is up round 100% within the final 10 years; the present quarterly payout is $1.02 per share.
Administration plans to develop its dividend per share at a mid-single-digit proportion charge yearly (learn: round 5% a yr) via 2028. With constant share repurchases and wholesome money technology nonetheless coming from the cigarette enterprise, I feel that is an achievable objective.
MO Free Cash Flow Per Share knowledge by YCharts.
Why you should purchase Altria Group inventory proper now
Shopping for shares of Altria Group inventory is a simple method to get dividend earnings and dividend progress over the following 5 years. It’s a good inventory so as to add to a portfolio to offer a counterweight to the expansion and expertise names that could be sinking in the mean time.
Shopping for $1,000 price of Altria Group inventory offers you round $70 in dividend earnings yearly, primarily based on the present dividend yield. With free money circulation per share of $5.01 — the gasoline for dividend funds — and a ahead annual dividend per share of $4.08, Altria has room to develop payouts by 5% a yr for 5 years even when its free money circulation per share stays stagnant. Nevertheless, over the past 10 years, Altria’s free money circulation per share has grown by 103%, outpacing its dividend per share progress.
What does all this imply? For each $1,000 you place into Altria Group inventory at this time, you’re going to get round $70 in dividend earnings this yr. However over the long run, the corporate ought to wind up paying you even greater quantities primarily based on its capital return technique. This makes Altria a incredible dividend inventory to carry throughout unsure market environments. Watch these dividend funds pile up at the same time as hypergrowth shares expertise main volatility.
Don’t miss this second probability at a probably profitable alternative
Ever really feel such as you missed the boat in shopping for essentially the most profitable shares? Then you definately’ll wish to hear this.
On uncommon events, our knowledgeable staff of analysts points a “Double Down” stock advice for firms that they assume are about to pop. In the event you’re apprehensive you’ve already missed your probability to speculate, now’s the most effective time to purchase earlier than it’s too late. And the numbers converse for themselves:
- Nvidia: if you happen to invested $1,000 once we doubled down in 2009, you’d have $244,570!*
- Apple: if you happen to invested $1,000 once we doubled down in 2008, you’d have $35,715!*
- Netflix: if you happen to invested $1,000 once we doubled down in 2004, you’d have $461,558!*
Proper now, we’re issuing “Double Down” alerts for 3 unbelievable firms, and there might not be one other probability like this anytime quickly.
*Inventory Advisor returns as of April 5, 2025
Brett Schafer has no place in any of the shares talked about. The Motley Idiot recommends Philip Morris Worldwide. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
