For investors looking for a dependable source of passive income, a methodical selection process is needed to distinguish solid dividend payers from possible disappointments. One useful method focuses on companies that provide a good yield and also show the fiscal capacity to maintain and possibly increase those payments. This method favors stocks with strong dividend scores, which assess yield, increase, and reliability, while also demanding a minimum level of acceptable earnings and fiscal soundness. This confirms the core business is sufficiently stable to maintain its payouts to shareholders.
ALTRIA GROUP INC (NYSE:MO) appears from such a filter as a prospect deserving more attention for portfolios concentrating on income. The company, a leading force in the U.S. tobacco business with famous names like Marlboro and Copenhagen, has been a consistent choice for dividend investors.
A High-Yield Component in a Portfolio
The most obvious draw for dividend investors is Altria’s large yield. In present conditions, its payout is notable for its pure income-producing size.
- Current Yield: The stock has a trailing dividend yield near 7.22%. This is much greater than both the S&P 500 average (near 2.32%) and the average for other tobacco companies (about 4.59%).
- Dependable History: Steadiness is vital in dividend investing, and Altria meets this. The company has issued a dividend for over ten years and, notably, has not lowered it in that time. This record offers some assurance of its dedication to giving capital back to shareholders.
This large, steady yield is the main reason MO performs well on dividend filters, directly meeting an income investor's central goal of creating significant cash flow from their investments.
Assessing Dividend Reliability
A large yield by itself is not enough to invest; the payment must be reliable. This is where the filter conditions for acceptable earnings and soundness become very important. A company can only keep up dividends if it is regularly profitable and handles its finances carefully. Altria’s basic report shows a varied but mostly acceptable situation here.
Earnings Strength: Altria’s business results are a major positive. The company gets a high ChartMill Profitability Rating of 9, indicating outstanding margins and returns on capital.
- Its Profit Margin of 37.78% and Operating Margin of 52.01% are among the best in its business.
- The Return on Invested Capital (ROIC) of 35.73% is very good and shows very effective use of capital.
This strong earnings power is what finances the dividend. A company creating such consistent cash flows is naturally in a better position to maintain its payments to shareholders.
Points for Attention: Still, the reliability assessment needs a full view. The report indicates two warning items that investors must consider:
- High Payout Ratio: Altria distributes about 78% of its net income as dividends. While this is typical in established, cash-producing businesses, it allows less flexibility if profits encounter sudden challenges.
- Earnings Compared to Dividend Increase: The company’s profits have been rising more slowly than its dividend over the reviewed time, which the report states is not a lasting pattern over many years.
These items are partly balanced by the company’s consistent cash flow creation but highlight the need to watch future earnings results.
Fiscal Soundness and Price Context
The filter for fiscal soundness serves as a protection. Altria receives a medium ChartMill Health Rating of 5. The examination reveals a clear split: good long-term stability but poorer short-term cash availability.
- Stability is Firm: The company’s Altman-Z score shows no insolvency danger, and its debt-to-free-cash-flow ratio implies it could repay its debt in a sensible period. This general stability is important for lasting dividend reliability.
- Cash Availability is a Question: The report notes a Current Ratio and Quick Ratio under 1, which is poorer than most industry competitors. This suggests possible issues in meeting immediate liabilities without obtaining outside cash or renewing debt, a detail for investors to acknowledge.
Regarding price, Altria seems low-cost. With a P/E ratio near 10.9, it is priced lower than the wider market and its industry average. This price, paired with the large yield, can be attractive to investors focused on value and dividends, though it also shows market worries about long-term decreases in smoking and the company’s future potential.
Increase Potential
It is necessary to set expectations correctly: Altria is not a company focused on expansion. The company’s ChartMill Growth Rating is a weak 3. Sales have been falling a little, and future increase in both revenue and profits is expected to be small. For an investor focused only on dividends, this could be an acceptable compromise, choosing high present income over share price gains. The idea assumes the company’s steady, cash-producing business can continue for the coming years.
Summary
Altria Group makes a strong argument for a particular kind of dividend investor: one wanting high present income from a company with a long payment record, very good earnings, and a low price. Its large yield is backed by strong cash flows, though investors must stay mindful of the high payout ratio and the company’s limited-growth, mature nature. The filter process that found MO, focusing on a high dividend score along with tests for earnings and soundness, effectively finds a stock that matches a traditional income-producing function, though with the specific risks belonging to its business.
This review of Altria came from a methodical filter for good dividend payers. You can review the complete present list of stocks matching these conditions by using the Best Dividend Stocks screen yourself.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis is based on data provided and screens that rely on historical and projected metrics, which are not guarantees of future performance. Investors should conduct their own research and consider their individual financial circumstances and risk tolerance before making any investment decisions.
