Altria Group Now Yields Twice as Much as Coca-Cola. Is It the Most Overlooked Dividend Stock? Here's the Clear Answer.
Coca-Cola (NYSE: KO) is the stock most income investors picture when they think "safe dividend." Right now it yields about 2.3%. Altria Group (NYSE: MO) , the owner of Marlboro and a Dividend King in its own right, yields close to 6% , more than double. A gap that wide usually means one of two things: the market is sleeping on a good business, or it's pricing in a real problem. With Altria , I think it's mostly the second one, with a smaller piece of the first. Coca-Cola sells a product more people drink every year around the world. Altria sells cigarettes , a product fewer Americans smoke every year, by design and by regulation. That's the entire gap in a sentence. U.S. adult smoking rates have been falling for decades, and Altria's own cigarette shipment volumes decline most years accordingly. A lower growth rate, or an outright shrinking core business, gets priced with a lower earnings multiple and, mechanically, a higher dividend yield at the same payout amount. That's not the market being lazy. That's the market doing its job. Where this gets more interesting is in what Altria is doing with the cash that declining cigarette volumes still generate in enormous quantities. The company just raised its quarterly dividend 4.7% to $1.11 a share in August, its 61st increase in the past 57 years, and it's targeting mid-single-digit annual dividend growth through 2028. That takes real cash discipline, and Altria is funding it two ways: squeezing more profit out of a shrinking cigarette business through pricing power, and building a real position in nicotine pouches, the one part of the tobacco category still growing fast. Continue reading