Why You Should Look At Owning Altria Stock


Why You Should Look At Owning Altria Stock

By Editor, Bear Market

The stock market has been volatile since Mid-March when the Coronavirus began hitting the US in full force.  And will remain so for a while as we see how things go when opening the economy back up.

You also need to consider the mass unemployment US and worldwide.  And the media talking about another potential major market crash.

Combined, these things make many people worried about what to do.  Maybe you among them?

Because of this, today I’m showing you one stock you should consider investing in to earn safe investment returns over time.  One where you’ll also get paid an 8.9% dividend now just to own it.

You may not have heard this companies name before – but you know their logos and brands.

Altria is a tobacco product manufacturer, producer, and distributor.  Its 2 major business lines are cigarettes and smokeless tobacco (chew).
And they’re a behemoth…

Altria is the owner of some of the most powerful tobacco brands in the world: Marlboro, Copenhagen, Skoal, and Black & Mild as a few examples.

Marlboro is the 23rd largest/most recognized individual brand in the world. And this brand alone owns 43% of cigarette market share.

How large is that?

The Marlboro brand is larger than the next 8 largest cigarette brands combined.

These brands combine with two other major factors to give Altria enormous competitive advantages.

First are its economies of scale – number of products it manufactures and sell.

  • Economies of scale give companies the ability to earn higher returns and profits by spreading operating costs over a huge number of products.

And second is its distribution network – its relationships with gas stations and retailers where its products are sold.

  • This gives Altria negotiating power to work to lower costs and increase profits and cash flows.

The brands, economies of scale, and distribution network among other things give Altria enormous competitive advantages.

And these also make the company one of the biggest and best run tobacco company in the world.

What does this mean for you?

Over the last 10 years it averaged an operating profit margin of an enormous 44.6% per year. I look for any company to produce above 10% margins on a consistent basis to consider as an investment.

And its FCF/Sales margin averaged 26% per year… I look for anything above 5% on a consistent basis to consider an investment.
Altria crushes my threshold on both important metrics… These are important because they show Altria produces profits and cash to co
ntinue funding operations and growth.

And pay hefty and increasing dividends.

As of today, Altria has a dividend yield of 8.9%.

Plus, it increased its dividend by an average of 12.7% per year over the last decade…  From $1.46 per share in 2010 to $3.32 per share as of this writing.  And it will continue increasing this more in the future with its large free cash flow production mentioned above.

Its shares have gone up enormously in value over the last 20 years too…

If you would’ve owned Altria shares from January 1st, 2000 to today in late May 2020 you would have earned a total return of 1,955.21%… Total returns include reinvesting dividends.  This translates to an average yearly return of 16% per year rounded up.

If you would have invested $10,000 in Altria stock, that would have turned into $205,618.67 in 20 years.

If you would have invested $10,000 in a stock market index fund – say the SPDR S&P 500 ETF Trust (SPY) – during this same period, you would have earned an average yearly return of 5.4% and a total return of 191.3%.

This turns your $10,000 into $29,116.72 in 20 years.  Not bad.  But crushed by owning Altria stock.

Altria stock outperformed the market by 606% over the last 20 years.

Now I’m not saying Altria will continue to perform this well and beat the market by this much in the next 20 years.

As the finance saying goes – past performance is not an indicator of future returns But I am confident Altria will continue to perform well over time.

Look at Altria stock if you’re looking for an ultra-safe and high yield investment.  One that should continue compounding your investment returns into the future.

 

Regards,

Editor
Team Bear Market

 

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