Altria (NYSE:MO), formerly known as Philip Morris USA, is among the top dividend stocks trading on the stock market in the tobacco category. It may be a low growth stock but Altria (NYSE:MO) has shot up by 29 percent this year, ousting the whole S&P 500’s 10 percent gain. There are several reasons why Altria (NYSE:MO) is one of the strongest and formidable dividend stocks:
Altria (NYSE:MO) has a great annual yield, worth 4.6 percent which is higher than the rival Reynolds American (NYSE:RAI) American’s 4.2 percent. Both the companies are ahead of S&P 500’s total yield. For a low growth company like Altria (NYSE:MO), that’s quite an achievement.
Tobacco stocks usually promise comparatively higher payout ratio; a certain percentage of the earnings is paid out as dividends. In the past year, Altria (NYSE:MO)’s average payout ratio stood at 88.5 percent which was higher than Reynolds American (NYSE:RAI) American’s 86.5 percent.
Altria (NYSE:MO) has a history of having robust dividends. Both tobacco giants share a history of raising their dividends annually but Altria (NYSE:MO)’s dividends have been outperforming every competition consistently. Altria (NYSE:MO) upped its quarterly dividend by 7.3, 9.1 and 8.3 percent in 2012, 2013 and 2014 respectively. Reynolds American (NYSE:RAI) raised its dividends by 5.4, 6.8 and 6.3 respectively. Altria (NYSE:MO)’s lead is evident.
Altria (NYSE:MO) is also favored by investors because of its great dividend stock. Over the years, investors have swarmed over Altria (NYSE:MO)’s stock in the market, due to which Altria (NYSE:MO)’s stock has been trading positively over all these years. Dividend stock, after all, is a stock which comes with a guarantee of good payback, if not that, then major reimbursement should the stock fall down.
Altria (NYSE:MO)’s return on equity is also great and numbers show that the company is adept is turning the shareholder investment into heaps of profit. Companies with a growing return on equity also cherish reinvestment of income on other significant moves such as expansion. In a time when tobacco market is shrinking day by day, Atria (NYSE:MO) has formed itself a position which is both formidable and respected. Altria (NYSE:MO) can also be called the sole hope of the tobacco market.
Altria (NYSE:MO) is generating cash flow that is both rapid and healthy as compared to the competitors. In a time when the smokers in U.S are declining, Altria (NYSE:MO) has managed not only to survive but keep a strong position in the market by raising cigarette prices and eliminating jobs. Altria (NYSE:MO), Reynolds American (NYSE:RAI) and Lorillard make 84 percent of the tobacco market of U.S.
Investors have enormous faith in Altria (NYSE:MO) despite the dwindling cigarette market. It shouldn’t come as a surprise, any company, despite its category, is great if its dividends are healthy. Altria (NYSE:MO), along with Reynolds American (NYSE:RAI) provide a healthy base for the cigarette market. Not only that, Altria (NYSE:MO) is a safe haven for investors looking to multiply their investment, which is quite commendable for a company at times like these.