Sell Altria During Market Hours

For the extremely conservative investor, the time has come to issue a sell recommendation for Altria (MO). The stock has performed reasonably since the Research recommendation was issued on December 9, 2008. It is highly recommended that anyone who bought the stock based on my research should re-read that post. The stock essentially went up from the date of recommendation. From the current level of $17, MO is poised to reach the $20 level with no effort. However, the returns that this stock has provided within the last two months say that it is worthwhile considering alternatives.

MO was recommended when it was trading at $14.99. As of Thursday January 29, 2008 MO was quoted at $17. This equals a return of 13.11% in less than 2 months. Conservatively, on an annualized basis this would equal approximately 78% return. Selling this stock now also generates a return 1 and a half times the amount of the dividend yield if the stock was held for a whole year.

For those who are willing to take the risk of holding on to this stock, MO announced 4th quarter earnings of $0.33 per share which implies annual earnings of $1.32. This equals just enough to pay the dividend of $1.28 with little room for a dividend increase in the coming year. At this point, it is difficult to say that the dividend is secure. However, the recent acquisition of UST, an earnings powerhouse in its own right, is likely to provide some life for MO earnings in the coming years.

It is always recommended that when selling a stock, one should not place an order after hours or when the market is closed. This leaves the seller in the position of being vulnerable to the whims of the market makers. Instead, place your sell orders only as a market order during market hours. Some would complain that a market order during market hours might leave some profits on the table. However, I would rather leave some money on the table rather than have it taken away from me by the trades that are placed by institutions and market makers.

Disclosure: I hold a 50% position in MO.

Comments

[buttwipe:]

Hold mo this guy is an idiot i have had mo for thirty years and i am living of the div of mo and pm/ The div will continue to go up.

Jan 30 06:24 AM

[Teak:]

How does Seeking Alpha decide which of the many blog postings to put on their site? This one didn't seem worth the band-width.

Jan 30 08:13 AM

[No Moss:]

Well, there are a lot of issues on the table from digesting UST. Primarily, 2009 will be fairly flat because of the recession, perhaps some increased taxation, and laying off of redundant UST employees. MO will probably look pretty good in 2010, when they have achieved full synergy with UST and Middleton (the cigar company).

No advertising expense, a concentrated product line (with the exception of their wine company), and nice investment in SAB Miller, high markup, stupendous cash flow...I don't find a lot to dislike.

Jan 30 09:17 AM

[BigOlDave:]

FirstCall has a “Buy” (3 Strong Buys, 5 Buys, and 2 Holds). Reuters
is Neutral, with Quality high and Growth low. S&P rates it 5 Stars
(“Strong Buy”), with a Jan. 2010 price target of $21.00.

Based on S&P’s initial fair value of $14.90, share price should be
$18.00 by March ’09.

Why would I consider dumping an investment that continues to deliver excellent results and continues to confirm analysts' assessments that I'll get annual appreciation of 25% and a yield of 7.5%.

This "Dividend Inc" post makes no sense!

Jan 30 12:44 PM

[captmike:]

If I had a 50% position in MO, I'd lighten up too.

Jan 30 01:05 PM

[longandshort:]

OMG!, I could not believe the amateur level of this article. Did this guy just graduate from "how to set up a trading account" school?? Sell your shares during market hours??....how about a stop loss, MR Expert?

Most shareholders of MO are aware that MO/PM is one of the best run businesses in the country(maybe the world). Its obvious this company is taking steps consistantly to deliver to its shareholders. If anything, I would double down.

Jan 30 01:16 PM

[Virginia View:]

Dividend Inc. is so wrong in so many ways. The dividend is safe, will be raised later this year, and all of this in the middle of the worst economy in 80 years. Every other company is cutting or suspending guidance, and missing earnings estimates. MO, not only delivered what it had promised, it forecast an increase in 2009 of 3-6%, and that is WITH the government's continued and increased taxation of an industry which is successful in order to bailout other business models which have failed....

Jan 30 02:56 PM

[Alex Lann:]

Anyone who sells an interest in Altria (Mo) is of unsound mind as Altria is the most profitable company of all time (19% compounded since 1957) One might buy Proctor (Pg) at this time as it has crashed (Proctor has earned 14% since 1837). People outside the boardroom of these gem companies do not know enough to make adverse comments.

Jan 30 09:08 PM

[C. Fischer:]

The author here doesn't really seem to grasp some basic financial concepts. The rationale behind selling is because it went up a few bucks in a short period of time, and if you annualize that return it seems impressive, so sell?

Also, he doesn't seem to understand that the ability to pay a dividend really has nothing to do with reported EPS and everything to do with cash flow.

Jan 31 12:24 AM

[Dividend Gr...:]

MO has indeed been the best performer in the S&P 500 since 1957. Would it be the best performer in the S&P 500 over the next 50 years? Highly unlikely imho.
I wonder if the company's merger with UST won't lead to a div cut sometime down the road.

Jan 31 10:51 AM

[Dividend Inc:]

Thanks for the comments and the thoughtful critiques. Unfortunately, the basis of my blog is not intended for "long-term" gains as some have artfully pointed out. If some would like to further entertain themselves with wasteful and preposterous reading, visit the "About This Site" section (dividendinc.blogspot.c...). In my defense, I have accrued, at minimum, 15% gains for four consecutive years in a row, including 2008. I hope that those who have been so critical of my "amateur" ideas are willing to take into consideration the goals, objectives and results of the blog.

I have found MO to be a wonderful long term holding and appreciate all the different ways that this stock and company can be viewed as a core holding.

Thanks again everyone.

-Touc

Jan 31 02:55 PM

[User 350165:]

I have to take the authors post with a grain of salt. Yes, Altria is not a growth stock by any means even with the UST acquisition. But MO is not a trading stock, its one you hold onto for a long time. MO has rewarded investors very nicely the past 20 years. Its dividend alone is gravy, its management team and BOD in my view is best in class and maybe one of the best in the Fortune 500. The company has always paid a hefty dividend in an industry where there product is selling less and less due to health concerns and high taxes. But its a product that will always sell because its addictive.

Once UST is fully incoporated into Altria it will add to earnings. In three years time I see MO having yearly EPS of 1.70-1.90

In addition, Altria owns a economic interest of 28% in SAB Miller, which adds to its healthy balance sheet.


But the author does have credibility in the sense that the purpose of the blog is not LT goals. In reality for that purpose he may be right in the short term.

Feb 03 04:25 PM

[rkr:]

I agree, I don't know what truck this smuck/fool fell off of, but He clearly got lucky bought in at 14.99 (me , $14.61 on top of 400 at $19.10.)
I agree with one comment, how does Seeking Alpha pick these people?


On Jan 30 06:24 AM buttwipe wrote:

> Hold mo this guy is an idiot i have had mo for thirty years and i
> am living of the div of mo and pm/ The div will continue to go up.

Feb 05 03:31 PM