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Altria Group’s Half Century of Dividend Growth


Sep. 25 2015, Updated 8:05 a.m. ET

Analyzing Altria’s dividend payment history

On August 21, 2015, Altria Group’s (MO) board of directors approved an increase of 8.7% in the quarterly dividend from $0.52 to $0.565 per common share. As a result, the annualized dividends payment is $2.26 per common share.

Dividends paid were ~$3.9 billion in 2014, compared to $3.6 billion 2013. The company has increased its dividend 49 times in the last 46 years.

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Dividend payout versus peers

Altria Group’s dividend payout for the trailing twelve months came in at 78.3%. In comparison, dividend payout ratios for peers Reynolds American (RAI), British American Tobacco (BTI), and Philip Morris International (PM) came in at 48.8%, 69.3%, and 83.5%, respectively.

Altria Group and Philip Morris International, like other tobacco companies, have a great ability to generate cash due to expanded margins and profitability. Both the companies’ FCF (free cash flow) for the trailing twelve months came in at $4.9 billion and $6.6 billion, respectively. This was also the prime reason for Altria’s higher payout ratio than peers. FCF for peers Imperial Tobacco Group (ITYBY) and British American came in at $2.2 billion and $2.9 billion, respectively.

Share repurchase program

Altria Group also has a share repurchase program, in which shares are purchased from the common market. During 2014, the company repurchased 10.4 million shares at a cost of ~$0.5 billion, which came at an average price of $46.41 per share.

Dividend payout target

Altria Group expects to continue to maintain a dividend payout ratio target of ~80% of its adjusted diluted EPS (earnings per share). As discussed earlier in this series, apart from receiving dividends from its wholly-owned subsidiaries, the company also has a 27% interest in SABMiller (SBMRY). As a result, Altria receives cash dividends on its interest in SABMiller.

Altria (MO) and Philip Morris International (PM) have exposure in the Consumer Staples Select Sector SPDR ETF (XLP), with 5.7% and 7.3%, respectively, of the total weight of the portfolio as of September 5, 2015.

In the next part of this series, we’ll look at Altria’s recent stock price movements.


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