Altria Group Inc (NYSE:MO): A High-Yield Dividend Stock with Strong Profitability

Investors looking for dependable income sources frequently choose dividend investing, a method centered on holding stocks that offer regular payments. One way to find good dividend stocks is by filtering for firms with good dividend ratings while also having acceptable profitability and financial condition. This method helps remove companies with payments that may not last or hidden business problems, with the goal of creating a collection of stocks that can provide passive income for many years. By focusing on these factors, investors can better manage the trade-off between appealing yields and basic company soundness.

Dividend Profile

ALTRIA GROUP INC (NYSE:MO) makes a strong argument for investors focused on dividends, mainly because of its large yield and dependable payment record. The company's dividend traits are notable in a few important ways:

• Dividend Yield: MO provides a large 6.45% yearly dividend yield, which is much higher than the industry average of 3.94% and the S&P 500 average of about 2.44%
• Payment History: The firm has kept up dividend payments for at least ten straight years without cuts, showing its dedication to shareholder returns
• Dividend Growth: Although small, MO has reached a 4.03% yearly dividend growth rate over recent years, offering some defense against inflation

These dividend features match the screening method's focus on dependable income creation, as a steady payment history and higher-than-average yields are the base of lasting dividend investing.

Profitability Assessment

The screening method stresses acceptable profitability since companies that produce solid earnings are in a better position to keep up and increase their dividends. MO performs very well in this area, reaching a ChartMill Profitability Rating of 9 out of 10. The company's profitability numbers show outstanding operational effectiveness:

• Return Metrics: MO provides notable returns with ROA at 27.10% and ROIC at 37.10%, both putting the company in the best group of its industry
• Margin Strength: The company keeps up solid margins at every level - profit margin (37.13%), operating margin (51.20%), and gross margin (61.41%) - all displaying improvement in recent years
• Industry Standing: MO does better than most of its tobacco industry competitors across several profitability measures

This sound profitability picture backs the dividend screening plan by showing the company has enough earning capacity to maintain its dividend promises even in difficult economic times.

Financial Health Considerations

While the screening standards accept acceptable instead of outstanding financial condition, MO's balance sheet shows a varied situation that deserves close review. The company gets a ChartMill Health Rating of 5 out of 10, showing both positive aspects and issues:

• Solvency Strengths:

  • Altman-Z score of 5.20 shows no short-term bankruptcy danger
  • Debt to FCF ratio of 2.83 implies controllable debt levels compared to cash creation
  • The company has been lowering shares outstanding, possibly increasing per-share value

• Liquidity Concerns:

  • Current ratio of 0.39 and quick ratio of 0.24 are lower than industry norms
  • These liquidity numbers indicate possible difficulties in meeting immediate debts

The screening method recognizes that some dividend-paying companies might have higher debt levels, but the attention stays on whether the full financial situation supports ongoing dividend payments.

Valuation and Growth Context

From a valuation viewpoint, MO seems fairly priced compared to wider market indexes and industry competitors. The stock sells at a P/E ratio of 12.25 and forward P/E of 11.32, both under S&P 500 averages. However, growth stays limited with revenue dropping a little in recent years and predicted to increase only slightly in the future. This growth pattern is common for established dividend-paying companies, where investors choose income over price increases.

Sustainability Considerations

While MO's dividend picture seems appealing, investors should be aware that the company's payout ratio is at 78.52% of earnings, getting near levels that some view as less lasting. Also, the dividend has been increasing more quickly than earnings in recent times, which might need watching. The detailed fundamental analysis report gives more detailed views on these lastingness measures and how they compare inside the tobacco industry.

For investors wanting to find similar dividend chances, more screening outcomes are available using the Best Dividend Stocks screener, which uses similar rules to find companies with good dividend traits along with acceptable profitability and financial condition.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with a qualified financial advisor before making investment decisions. Past performance does not guarantee future results, and all investments carry risk including possible loss of principal.