Article summary
Since the beginning of November, shares of Altria (NYSE:MO) have come down significantly due to the FDA's plan to ban menthol cigarettes that are of vital importance to Altria's sales. This news was another blow for tobacco companies given the numerous risks we already see today.
Nonetheless, Altria shares are trading at FCF yields of 7.8% for 2019, and when adding the stake in AB InBev, Altria's financial situation remains extremely solid. For quite some time Altria's management has proven it is capable of producing massive cash flows that are contributed directly to shareholders in the shape of dividends and buybacks and I expect this to continue for many years to come. As such, the following two graphs point out Altria's shareholder-friendly policy and should be cherished by every long-term value investor.
The main reason why I consider buying additional Altria shares is the pressing pension issue in Belgium that urged my parents to seek undervalued high-yielding companies. As a youngster, I am keenly aware of the compounding effect dividend investments provide, and in particular, Altria should remain a favorite of conservative income investors. Because today's valuation meets my value investing requirements, Altria shares give me the luxury of taking this long-term opportunity, thereby planning my early retirement.
Not only do shares provide compelling dividends and a rock-solid track record, but they also give investors the opportunity to make additional money by selling call options. I believe this is the icing on the cake to get double-digit returns over time.
In summary, despite today's sell-off, I remain confident of Altria's wide moat, cash-rich business model, and recession-proof character. I expect shares to return tonnes of cash flows and am buying the dip today. Throughout this article, I am going to highlight the risk factors investors should bear in mind as well as how Altria will
