Altria is the
holding company for Phillip Morris USA, John Middleton (machine made cigars), UST (moist smokeless tobacco) and Phillip Morris
Capital Corporation. As a result of the
spin offs of Kraft Foods and Phillip Morris International, breaking out past
return on equity numbers as well as dividend and earnings growth rates directly
attributable to this entity is beyond our pay grade; plus we have yet to find any other analyst
that has undertaken the task.
Looking forward, the primary attraction
that MO holds for us is its dividend yield (5.0%) as well as its very high cash
flow per share which should allow the company to increase its dividend annually
as well as engage in a share buyback program.
That said, the
company should be able to grow its earnings in the future as a result of:
(1) strong
brand portfolio (Marlboro, Virginia Slims, Copenhagen, Skoal, Chateau St.
Michelle, Columbia Crest),
(2) major
emphasis on new product line extensions into smokeless tobacco and cigars,
(3)
increased operating efficiencies,
(4)
increasing prices.
Negatives:
(1) the recent
large increase in the Federal excise tax on cigarettes,
(2) increased restricts
on smoking,
MO is rated B+
by Value Line, has debt to equity ratio of 79% and its stock yields 5.0%.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2009
MO 5.0% 7% 79% 5
Ind Ave 4.4 8 62 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2008 Margin Rating
MO 79% 93% 1 21% B+
Ind Ave 63 56 NA 14 NA
Chart
Note:
MO stock made great progress off its November 2008 low, quickly surpassing the downtrend
off its January 2008 high (straight red line) and the November 2008 trading
high (green line). Long term, the stock
is in an uptrend (blue lines).
Intermediate term, it is an uptrend (purple lines). The wiggly red line is the 50 day moving
average. The High Yield Portfolio owns a
50% position in MO, largely as a function of the spinoff of Philip Morris Int’l
(its value lowered by the value of the PMI received). The upper boundary of its Buy Value Range is
$18; the lower boundary of its Sell Half Range is $48.
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