This Top Pick is a perennial investor favorite, especially for the annual dividend of 7.50%, which is paid quarterly.
Altria Group, Inc. (MO)
From Forbes Dividend Investor
The strength of the consumer staples sector during the month of December means that many stocks that had been huge laggards are now highly-prized. It’s easy to tap into a broad basket of food, drink, toothpaste, toilet paper, and tobacco stocks with low-cost ETFs like the XLP or VDC.
Food stocks like CPB, CAG, and HRL have always ended up sputtering and getting kicked out of the portfolio, but we’ve got a good thing going with Tyson Foods (TSN). For drink, we’re covered by Embotelladora Andina S.A. (AKO.B) which sells Coca-Cola products in Chile, and Keurig Dr Pepper (KDP) which does 90% of its business in the U.S., selling coffee, carbonated beverages and juice drinks.
Another staple that has the lucrative element of consumer addiction is tobacco, and the consistent financial performance of Altria Group attests to the weed’s potency in keeping the Marlboro-maker flush with cash. In addition to $1.65 per share in cash on the books, free cash flow of $4.38 per share over the past 12 months gives plenty of cushion for annual dividends of $3.60. Dividends have grown 10% annually over the past three years. Altria did trim the dividend in the wake of its spinoff of Phillip Morris International in 2008, but 13 years of dividend hikes have the payout at new highs.
Besides the rich 7.5% dividend yield, Altria group looks cheap with substantial discounts to five-year average valuations on measures including price-to-sales, price-t0-cash flow, and enterprise value to EBITDA. Revenue has maintained an upward trajectory, growing 6.9% over the past three years, and higher by 25% over the past decade.
John Dobosz, Forbes Dividend Investor, newsletters.forbes.com, 212-367-3388, January 7, 2022