Altria Group Inc (NYSE:MO) - A High-Yield Dividend Stock Worth Considering

Altria Group Inc (NYSE:MO) stands out as a compelling choice for dividend investors, offering a high yield and a strong track record of payouts. The company, known for its tobacco products, has been identified by our dividend screener due to its solid profitability, reasonable financial health, and attractive dividend metrics.

Key Reasons Why MO Appeals to Dividend Investors

Strong Dividend Yield and Reliability

• High Yield: MO currently offers a 6.94% dividend yield, significantly above the industry average of 3.86% and the S&P 500 average of 2.42%.
• Consistent Payouts: The company has paid dividends for at least 10 years without reductions, demonstrating reliability.
• Modest Growth: While dividend growth has been modest at 4.03% annually, the stability of payments makes it appealing for income-focused investors.

Profitability Supports Dividend Sustainability

• Exceptional Margins: MO boasts a profit margin of 42.97% and an operating margin of 49.62%, ranking among the best in its industry.
• High Return on Capital: With a Return on Invested Capital (ROIC) of 36.74%, MO efficiently generates profits from its investments.
• Payout Ratio Concern: The dividend payout ratio is 67.18%, which is on the higher side, but still manageable given the company’s strong cash flow.

Financial Health – A Mixed Picture

• Solid Solvency: MO has an Altman-Z score of 4.47, indicating low bankruptcy risk.
• Liquidity Weakness: The company’s current ratio (0.57) and quick ratio (0.47) are below industry standards, suggesting some short-term liquidity concerns.
• Debt Management: The Debt-to-Free Cash Flow ratio (3.08) is favorable, meaning MO can cover its debt obligations in just over three years with its cash flow.

Attractive Valuation

• Low P/E Ratio: MO trades at a P/E of 11.28, below both the industry average (17.68) and the S&P 500 (26.98).
• Undervalued Compared to Peers: 87.5% of industry peers have a higher Enterprise Value to EBITDA ratio, suggesting MO is priced competitively.

Final Thoughts

MO presents a strong case for dividend investors, combining a high yield with a history of reliable payouts and solid profitability. While liquidity metrics are a concern, the company’s overall financial health and valuation make it a noteworthy candidate for income portfolios.

For a deeper dive, review the full fundamental analysis of MO.

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Disclaimer

This is not investment advice. Always conduct your own research before making investment decisions.