Is Altria A Good Dividend Stock?

We all know smoking is bad for your health, but the effects of vaping are much more controversial, with medical professionals from around the world weighing in. Regardless of how you feel about tobacco, one name stands out in the industry. But is Altria a good dividend stock?

As one of the largest American (and worldwide) tobacco companies, Altria’s subsidiaries include Philip Morris USA, Nat Sherman, John Middleton Company, Helix Innovations (a joint venture), U.S. Smokeless Tobacco Company, Ste. Michelle Wine Estates, and more. It even holds notable minority stakes in AB InBev and Juul.

Let’s discuss whether the company can provide returns in the aftermath of the global COVID-19 lockdowns. Smoking has long been explained as bad for your health, but the spread of a respiratory coronavirus makes quitting smoking even more important than ever. How will Altria Group Inc (MO) shareholders fare in the 2020s?

Is Altria Dividend A Value Trap?

Like most of the stock market, Altria stock took a nosedive in the spring of 2020 as lockdowns were announced around the world. However, many analysts believed shares would rebound as quarantined masses turn to vices – like recreational cannabis, tobacco, and alcohol – to get through the pandemic.

Unfortunately, share price and dividend gains from this run on the market were never realized for the company. Although people certainly have more to worry about leading into the 2020 election, it appears cigarettes have fallen out of style among the living. Even Altria’s holdings in other markets are suffering.

Juul, for example, found itself in regulatory crosshairs in 2019, being blamed for a vaping health crisis among the nation’s youth. The year ended with the company removing most of its flavors (including mango and cucumber), being banned from stores like Walmart, and CEO Kevin Burns stepping down.

This all happened before the lockdowns, and public sentiment doesn’t seem to be going its way, so why invest in Altria [MO]?

Why Buy Altria Stock?

There are few sure bets in life, but you can rest assured humans will always have our vices. For some, it’s sex, drugs, and rock & roll. Others prefer alcohol, smoking, or blowing vape clouds (we get it – you vape). What a worldwide viral pandemic proved was that

Despite its regulatory exposure, Altria brands aren’t completely removed from retail shelves. Even Walmart still carries the company’s cigarettes and other tobacco products.

Although cigarette sales are estimated to continue declining (especially as older smokers die from smoking-related causes), Altria has the retail footprint to fill whatever comes next.

The company even invested $1.8 billion in Canadian cannabis company Cronos Group at the end of 2018. This means those long-rumored Marlboro marijuana cigarettes could one day become a reality.

However, it’s important to remember Altria already underwent a complete rebranding to remove itself from the stigma of Philip Morris. It is unlikely that the tobacco branding will ever transfer over to cannabis.

Of course, it doesn’t need to transfer for investors to gain dividends.

Should You Sell Altria Stock?

Everything is speculative at this point, as Altria enters a completely new age of health-conscious vices. Depending on the state you live in, alcohol, tobacco, and cannabis are all treated completely different. It could be illegal to have any of these vices, and they’re often heavily taxed, causing widely fluctuating prices wherever you go.

There are three trends pushing against Altria’s trifecta of vice products (cannabis, alcohol, and tobacco).

1. Americans are smoking less, according to the U.S. Centers for Disease Control, with only 38 million smokers left. This leaves a smaller (and continuing to shrink) smoking market for a company that once depended on that market.

2. Craft beer now dominates over 25% of the U.S. beer market, according to the Brewers Association. More American drinkers are looking to support local craft breweries over conglomerate brands like Budweiser.

3. The vaping crisis is causing a variety of lung injuries, according to the CDC and U.S. Food and Drug Administration. although safer than smoking, vaping is not safe. Like all other smokeless tobacco, there are inherent dangers. Heck, your vape pen could just explode in your hand like a Samsung Galaxy Note 7.

Although many analysts have downgraded Altria, selling right now means you’ll be taking hefty losses if you didn’t buy during the pandemic.

The company’s market cap in 2020 is half what it was in 2017, and it was already discounted before the world went into pandemic mode. It leaves many in the position of holding in hopes for dividends to payout at the end of the fiscal year.

Let’s explore Altria’s dividends and recap your investment prospects.

Is Altria a Good Dividend Stock?

Altria [MO] is a risky business – there’s no denying that. But it never was an investment for the risk averse anyway. Back in the 1970s when Big Tobacco was feeling regulatory heat, R.J. Reynolds executives backed off and apologized to the public for the health risks associated with smoking. Philip Morris executives, on the other hand, were smokers who backed the product.

This is what led to Altria brands having the prime shelf space it does behind the counters of big box retailers, grocers, and convenience stores alike.

Although the stock lost over 20% of its value in the first half of 2020 with little chance of recovery, the company’s efforts to remain profitable will ensure existing investors receive some type of annual dividends payouts.

If you choose to invest, there’s an 8.69% dividend yield so far, and the price is deeply discounted. The only questions remaining are how the company will pivot to meet the demands of a post-lockdown society. Stress is clearly piling up, but are people still turning to their vices for comfort?

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.