Altria: The Turning Point

The downside moves in Altria (MO) have caught many dividend investors by surprise this year, as the stock has shown some relatively significant declines with the end of the June trading period. The bearishness comes in light of positive factors that have been largely neglected by the market as a whole as recent dividend hikes and better-than-expected earnings performances have done little to bring back the buyers. But these improved fundamentals, potential acquisition strategies, and a greater attention paid toward healthier tobacco products brighten the outlook for investors that are taking a long-term positioning stance. We believe that the stock's elevated dividend payouts and the low valuations seen currently are enough to support the execution of buy positions at current levels in anticipation of an upward rally back through the June highs.

For dividend investors, Altria is generally considered to be a stable income investment and these trends were confirmed with a dividend increase of $0.05 per share (to $0.66 per share). This is a gain of more than 8%, and it is a reiteration of the fact that Altria (still the largest tobacco company in the US) has raised its dividend every year since 2008, when it spun-off its global arm as Philip Morris International (PM). The move has not done to help the stock price, however, and MO's PE valuation is now seen at 8.21. These numbers, when combined with the 4.24% dividend yield show just how far the stock has fallen over the last three months.


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