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.
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.