Tobacco companies have long been known for offering rich dividends. Altria (MO, Financial) is one such company. It is a dividend aristocrat. Despite hailing from an unhealthy industry, this company has a huge customer base. This company is known for becoming investors’ staple. It competes with premium brands and boasts of higher margins than most of them.
Recent financial results
- Altria’s 2014 fourth-quarter reported diluted earnings per share (EPS) increased over 100% to $0.63, as comparisons were affected by special items.
- Altria’s 2014 fourth-quarter adjusted diluted EPS, which excludes the impact of special items, increased 15.8% to $0.66.
- Altria’s 2014 full-year reported diluted EPS increased 13.3% to $2.56, as comparisons were affected by special items.
- Altria’s 2014 full-year adjusted diluted EPS, which excludes the impact of special items, increased 8.0% to $2.57.
- Altria forecasts its 2015 full-year adjusted diluted EPS to be in the range of $2.75 to $2.80, representing a growth rate of 7% to 9% from an adjusted diluted EPS base of $2.57 in 2014.
- Altria’s president and chief operating officer, Dave Beran, decided to retire on March 1, 2015, after 38 years with the company. Howard Willard, currently Altria’s Chief Financial Officer, was to become chief operating officer. William Gifford, currently Altria’s Senior Vice President, Strategy & Business Development, will become Chief Financial Officer. These changes were also effective March 1, 2015.
“In 2014, Altria delivered another year of strong business results and excellent returns for shareholders,” said Marty Barrington, chairman and chief executive officer of Altria. “We grew adjusted diluted EPS by almost 16% in the fourth quarter and by 8.0% for the full year, in line with our long-term EPS goal. We increased the dividend for the 48th time in 45 years. Altria also produced total shareholder return of 34.5%, well above returns for the S&P 500 and the Food, Beverage and Tobacco Index.”
“Our business results were anchored by a very strong performance in the smokeable products segment, complemented by contributions from our diverse business model,” said Mr. Barrington. “We’re also pleased with the steady progress Nu Mark is making as it builds e-vapor category leadership; Nu Mark successfully executed its national launch of MarkTen, which is now available in over 130,000 retail stores.”
2015 full-year guidance
Altria forecasts that 2015 full-year adjusted diluted EPS will be in the range of $2.75 to $2.80, representing a growth rate of 7% to 9% from an adjusted diluted EPS base of $2.57 in 2014, which excludes the special items shown in Table 1.
Altria expects that its 2015 full-year effective tax rate on operations will be approximately 35%. Altria also expects capital expenditures for 2015 will be in the range of $200 million to $250 million and that depreciation and amortization will be approximately $200 million.
To end
Many have thought that the cigarette industry is a sunset industry because of the social stigmatization attached to it. But there is a silver lining to it since an increasing number of people are moving towards ecigarettes. Out of the global $169 billion tobacco industry, about $6 billion comes from ecigs. The U.S. is the largest e-cig market worth $1.7 billion as of 2014. This company has plenty of room for growth and to offer to its shareholders.
MO is continually ramping up its innovation process. It is taking the right initiatives to gain market dominance. This trend is going to continue. MO is all set to build a solid international presence, and it may be rightly said that it will find many tobacco huffers. Investors who have no issues with these companies should definitely consider taking up this company for consideration. It has been known for pumping steady returns to its shareholders. MO is poised to grow further in the near future, creating shareholder returns.
Altria group has a domestic market share of about 50%, which makes it dominate the U.S. market. There is a decline in smoking rates, and the regulations are increasing. It is safer to invest in this company since people prefer the same brands over and over again. It has a steady balance sheet. The diversion into the ecigarettes will certainly add fuel to its growth.
(Source: Company’s Website)
