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Altria's Future: Stability from Dividends Amid Tobacco Decline

Altria stands out for its impressive dividend track record, raising it 59 times over 55 years. Despite challenges like declining cigarette sales, the firm's focus on smoke-free products and consistent dividend yield positions it favorably for long-term investors.

Date: 
AI Rating:   6

Altria's Earnings and Dividends
Altria has been a favorite among income investors largely due to its impressive history of dividend increases, having raised its dividend 59 times over the last 55 years. The current dividend yield is about 7%, which is quite attractive in today’s market. This type of consistent performance can create a stable income stream for investors even in times of economic volatility.

Adjusted EPS and Growth Goals
The company is targeting a mid-single digits adjusted earnings per share (EPS) compound annual growth rate (CAGR) off a 2022 figure of $4.84. In 2024, adjusted EPS increased to $5.12, indicating a CAGR of 2.9% over the last two years. While this growth is limited, it shows that Altria is attempting to capitalize on its existing markets and innovative smoke-free products like Njoy and its oral nicotine pouches.

Profit Margins and Revenue Structure
Despite the reported volume declines in cigarette sales, which have fallen from 76.4 million in 2023 to 68.6 million in 2024, Altria has still managed to increase its profits through strategic price hikes. This might indicate that their gross and operating profit margins remain healthy, even if overall revenue is under pressure due to declining cigarette consumption.

Market Positioning and Strategic Shifts
Altria's investments in next-gen products and its pursuit of smoke-free alternatives like Njoy amid the regulatory landscape show its adaptability. With Njoy's 15.3% rise in consumables and its growing retail market share, Altria appears to be emphasizing innovation to offset traditional revenue losses.

Cash Flow Health
While the specifics of free cash flow weren't discussed in detail, the company’s strong commitment to maintaining healthy profit margins and its ability to sustain dividend payments suggest that cash flow generation could be stable or slowly growing.

Overall, while challenges remain for Altria regarding reduced cigarette consumption, its efforts in diversifying its product line and focusing on next-gen smoke-free products could provide healthier growth drivers moving forward. Investors should also recognize that due to the largely recession-proof nature of tobacco products, Altria's performance may be more stable than in other sectors.

Stocks:  MO PM