Acquisition MO

Altria_Company_LogoThis acquisition came a lot later in my investment journey as it probably should have, but nevertheless a small peace of this beautiful business of Altria Group, Inc. (MO) is in my portfolio “The Dividend Machine“. The stock price has been accelerating upwards fast throughout this year of 2017 and just lately seen a nice decline in price starting in mid March 2017. It is now sitting about 7.4% off of its 52 week high. I believe the shares are valued fairly at this point, especially at such a low P/E Ratio it is trading at this time.

Company Overview: 

Altria Group, Inc. was founded in 1919 and is headquartered in Richmond, Virginia. Essentially, the company through its subsidiaries manufactures and sells cigarettes, smokeless products, and wine in the United States. It offers a diversified portfolio of cigarettes primarily under the Marlboro brand; cigars principally under the Black & Mild brand; and moist smokeless tobacco products under the Copenhagen and Skoal, Red Seal, and Husky brands. The company also produces and sells varietal and blended table wines, and sparkling wines under the Chateau Ste. Michelle, Columbia Crest, and 14 Hands names; and imports and markets Antinori, Torres, and Villa Maria Estate wines, as well as Champagne Nicolas Feuillatte in the United States. Lastly, it provides finance leasing services primarily in aircraft, electric power, railcar, real estate, and manufacturing industries.

Statistics:

  • Dividend Yield: 3.5%
  • 3Yr Dividend Growth Rate: 8.6%
  • Payout Ratio: 74.2%
  • P/E: 9.5
  • Consecutive Years of Dividend Raises: 8
  • Dividend Payout: Quarterly

I purchased 21 shares of MO for the price of $70.73 per share for a total investment of $1,485.33 adding around $51.24 to my annual dividend income.

It is the 4th time I am initiating a stock acquisition this year. This transaction is my first ever purchase of MO shares into the portfolio. Currently, MO ownership stake represents to be around 1.4% of my current portfolio value. Also, the acquisition of MO makes it the 39th company I am invested in.

Conclusion:

The 12-month dividend income increases to $3,255.

Portfolio “The Dividend Machine” has been updated with link > here.

Thank you for reading & have a great day!

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14 Comments

  1. JC on May 21, 2017 at 21:10

    I still don’t own MO myself primarily because the valuation is still quite rich. For me I don’t like the valuation here because the normalized P/E ratio shows a much different picture due to the AB Inbev merger/buyout which artificially boosted the P/E over the TTM. That truly is a one time event so it isn’t realistic to expect that to continue, although the dividends/income from their ownership stake should still generate real income for MO in the future. It’s just more difficult to quantify at this time. Still a solid company and if you reinvest dividends fro the next 10-20 years I’m sure you’ll be happy with your MO investment.

    • DividendVet on May 23, 2017 at 20:31

      I actually think the valuation is quite fair, not a great deal but nonetheless very reasonable, especially for this type of business. Will be happy to hold this one for next 50+ years.

      Thanks for your thoughts and a look from your perspective.

  2. Doug Arnold on May 21, 2017 at 23:19

    Owned it for a long time and upped it the last 6 months one of the best stocks there is out there should be able to head off any headwinds for a long time good job.

    • DividendVet on May 23, 2017 at 20:41

      Glad to hear you had great and growing success with it, the business has been a monster!

      I appreciate your comment.

  3. FerdiS on May 21, 2017 at 23:35

    I’m long MO since January 2014, so it is one of my “home run” stocks. I agree with JC and feel it is trading at a premium to fair value right now. However, in the long run, you should be fine.

    • DividendVet on May 23, 2017 at 20:48

      That was an amazing time to buy, doubled or perhaps even tripled your position’s valuation. Plus, the dividend YOC should be getting up there to double digit range as well. Nice work!

      You might be right regarding valuation and I am willing to pay the premium if that is the case, who knows the market will tell the story. 🙂

      Good hearing from you!

  4. Dividend Reaper on May 22, 2017 at 09:34

    As much as people want to bash “sin stocks” I find that it’s better the danger you know than the danger unknown. Cigarettes are still hard selling, lip smacking, revenue generators and I expect that trend will continue for some time with emerging markets. I don’t own MO but I do have Reynolds American (RAI) and I’ve been extremely pleased with my returns thus far. I have always thought of it as insurance. If (when?) the market decides to crash again, as bad as it sounds, people may be all the more willing to reach for that pack of smokes once more.

    • DividendVet on May 23, 2017 at 21:30

      Absolutely, very happy with Reynold American (RAI) and Philip Morris (PM) myself too. Essentially, I believe cigarettes will always have a demand due to pleasure seeking societal needs and no better product than once that is highly addicting. As bad as that sounds, the business model is genius, but it is a choice. Interesting though on market crash and consumer demand on cigarettes and perhaps even alcohol. Would love to see a study of that.

      Take care.

  5. Dividend--Portfolio on May 24, 2017 at 08:36

    I actually don’t own MO, but will have to take a closer look. I’m always looking for different ways to diversify my dividend portfolio which is only includes 10 different stocks. You would think it’s easier to find companies to invest in, but the learning process has been slow. Thanks for this post Div Vet.

    • DividendVet on May 26, 2017 at 20:40

      I have no problem finding great businesses to own, especially here in the land of capitalism, but the only problem I have is finding more and more capital to invest. Over time it will become easier finding deals and opportunities in the market just watch, study it and understand the most important fundamentals such as dividend growth, payout ratio, eps growth, etc…

      Best of luck.

  6. Stockles on May 27, 2017 at 17:54

    I´ve seen so many dividend bloggers buying Altria. I just can´t make my self buy a company selling cigarettes. It just seem so down-trendy if you know what I mean. Can´t see anyone smoking here in Norway anymore. However, it increases your dividend, and if the company remains safe, then it´s awsome. Best of luck.

    • DividendVet on May 27, 2017 at 20:15

      Then don’t. 🙂

      I think there will always be a demand.

      Take care..

  7. Captain Dividend on May 29, 2017 at 16:28

    MO is easily my best performer in my portfolio! I would have liked to have added more in the 70-71 range earlier this month but it’s shot up since then as it tends to do.

    • DividendVet on May 29, 2017 at 20:41

      That is the word on the Wall Street. Tobacco stocks are doing very well thus far and so should this.

      Thanks for the comment Captain.

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