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Altria’s Dividends Not Expected to Rise in 4Q16

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Dividends

On December 7, 2016, Altria Group (MO) announced a dividend of $0.61 for 4Q16. The record date was December 22, 2016. The 4Q16 dividend takes the company’s dividend for the year to $2.35, which represents a growth of 8.3% from the dividend of $2.17 in 2015. In 1Q17, 2Q17, and 3Q17, analysts expect the company to post dividends of $0.62, $0.62, and $0.68, respectively.

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Dividend yield

In 2016, Altria paid a dividend at a yield of 3.7%. In 2017, analysts expect the company to pay a dividend at a yield of 3.8%. A company’s dividend yield indicates how much the company pays out in dividends each year relative to its share price. At the Barclays Global Consumer Staples Conference in September 2016, Altria’s management announced that the company targets a payout ratio of 80%.

Capital reallocation

In addition to paying dividends, Altria rewards its shareholders with share repurchases. In the past five years, the company has repurchased shares worth nearly $5 billion. In 2015, it repurchased shares worth $554 million, and in the first three quarters of 2016, the company repurchased shares worth $550 million. In October 2016, it raised the authorization for share repurchases by $2 billion, which is expected to be completed by 2Q18. At the beginning of 4Q16, the company had approximately $2.5 billion under its share repurchase program.

You can gain exposure to Altria Group by investing in the Consumer Staples Select Sector SPDR ETF (XLP), which has invested 6.7% of its holdings in Altria. XLP has also invested 8% and 3% of its holdings in Philip Morris International (PM) and Reynolds American (RAI), respectively. Next, we’ll look at Altria’s valuation multiple.

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