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Retirement Strategy: You Don't Have To Be A Smoker To Own Altria

Jun. 03, 2020 9:05 AM ETAltria Group, Inc. (MO)APPL, DIS, ED, JNJ, MSFT, O, PEP, PG, T, XOM284 Comments
Regarded Solutions profile picture
Regarded Solutions


  • The first addition to PRIP is a company that has been going out of business for 40 years!
  • This company has made dividend-growth investors very happy with a track record of 50 consecutive years of dividend paying and increasing.
  • Yes, fewer folks are smoking, but the fundamentals are simply too strong to ignore.

Smoking Is Awful For Your Health But Great For Your Dividend Growth Income

Smoking is bad for your health but Altria (NYSE:MO) has been great for dividend growth investors for over half a century. On the other hand, the company has been declared "dead" for over 40 years. As cigarette smoking has declined in the USA as well as globally, Altria has had to broaden its reach to consumers as it works continuously to come up with safer alternatives.

The company has also implemented a 10-year plan to not only sustain, but to grow:

Our 10-Year Vision: Responsibly lead the transition of adult smokers to a non-combustible future.

The point is that based on the current fundamentals, adding MO to the new "Pandemic Retirement Income Portfolio" offers a unique opportunity to own an enormous company that has outstanding fundamentals at a price that might just offer a potential of a 35-40% capital appreciation based on its current price of about $39/share up to its 52 week high of about $52/share.

While that is not a given, the raw fundamentals show that the stock is seriously undervalued at its current price.

Here are a few simple charts to take a look at:

These first three charts show the share price drop and recovery from the low of about $32/share. But based on the fundamentals, the stock is oversold and undervalued.

The second chart shows that the dividend currently being paid annually is $3.32/share at a current yield of 8.39%. I can recall that back in the late 1980s and early 1990s the company faced lawsuits from around the nation that could have bankrupted the company, but didn't. The company persevered, and

This article was written by

Regarded Solutions profile picture
We mourn the loss of Alan Saltzman aka Regarded Solutions who lost his long battle with a terminal illness and departed on April 6th, 2021. Alan was a veteran contributor who started his journey with Seeking Alpha in 2011. He published more than 1000 articles and built a strong readership base of close to 80,000 followers. His contributions and expert guidance on retirement strategy will be immensely missed by Seeking Alpha and its readers._______________________________________________________________________My life's journey through retirement in my later years. and my suggestions going forward! Keep it Simple, Smart, and Safe!Stage 4 cancer.....2 years ago I couldn't focus...I stopped writing etc.....went on chemo, had to make stuff easy for my wife.....got out of all equities and now have fixed income and private family investments.Thanks for your support RS

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author used in his past, worked for him, and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (284)

dickinkona profile picture
My only comment here would be to just look at the stock price chart for the last three years. It's been a true roller-coaster, up and down, but the trend has continuously been down.. There appears to be no support level that it will not fall through. Fundamentals aside, I believe this stock is driven more by emotion, and the sentiment is and has been bad for a long time. Unless I see something substantive happen that will change this trend I will stay away. I'm not interested in a stock that pays a wonderful dividend by keeps dropping in value like MO has done.
Very good article. Long MO, PM, BTI
For someone who is 67, i always enjoy your thoughts and insight, as I try to generate income for my retirement, and not touch the principle if possible. thank you for your free advice it is appreciated and followed.
Thank you . Your approach is helpful.
I love reading what you write. You remind me of the guy next door or some other guy I would like to shoot the sh.. with. I never miss one of your articles as they are always interesting to me. I have bought and sold MO a few times over the years and your article reminded me to take another look. Thanks Regarded Solutions.
swiftstroker profile picture
U.S. Birthrates Fall to Record Low
Last year’s data are another sign of how American childbearing, which began declining during the 2007-09 recession, never fully rebounded......
I'm not a smoker, but I promote it. In my work travels I encounter smokers all the time. I encourage them to take their time with the cigarette. Then encourage them to light up another before we do business.

I would like to see a mutual fund that encompasses cigarettes, pharmaceuticals, pharmacies, alcohol, medical facilities and medical gases.
Afzal Raza profile picture
Yes I agree, and also prisons.
citikid profile picture
As I mentioned in a previous RS article, I’m reluctantly looking closer at tobacco after dismissing it for years due to my own personal and ethical struggle with investing in an addictive substance.

But in an irrational market you start to look for reason. And unfortunately tobacco is offering a rational economic option. Even if it is just another manifestation of the TINA debacle.

I’ve done some research on BTI and MO and although BTI looks better at a glance, I agree that MO is probably the better way to go.

In a world where Doctors are being allowed to do drive-by Botox injections during a pandemic, investing in MO no longer brings the same burden that it once did. For me anyway.

And there are conversations out there suggesting that tobacco users may be less likely to contract COVID-19 !

TINA told me it’s true !

Thanks for the insights RS !
It's true, the company is not dead, only millions of consumers of its products are (mainly from lung cancer and other respiratory diseases). There are so many great companies out there. Why choose to own one that is egregiously harmful, including by addicting young people to its hazardous product? Yes, many companies are far from ethically perfect, but let's not confuse the issue: this company is ethically egregious.
Regarded Solutions profile picture
and financially awesome.
VillageElder profile picture
Yes, it is financially awesome. But it is also legal. That is to say government approved. And it is getting into the newly government approved marijuana market. ($$$) The government is licking its tax revenue chops over the potential future, steady, reliable, revenues. So how willing is the government to kill this golden (tobacco brown, actually) goose? I would suppose not very likely. That is why reports of the company's demise have proved unfounded all these many years. You can like the company's product line or not, but its reliable customer base will keep the company rolling along financially well into the foreseeable future
AEGISBMD profile picture

I always hated preaching. You feel same about Alcohol? Never saw anybody smoke a pack of cigarettes and then drive into a minivan killing 5 people.

I saw a study years ago that a smoker in Alaska has cleaner lungs than a non-smoking New Yorker.
Wembley Fraggle profile picture
But you do have to be heartless.
Chain Smoker profile picture
You don't have to be a smoker to own Altia. But, its a hell of a lot better if you are!!!
Loving $MO, great weekly covered call play , except next week when it goes xdiv for .84 cents.

I would buy here and sell covered calls every single week. Its not my biggest hold. Its not $amzn , $googl , $aapl, but its a good $4000 investment right here. Covered calls plus dividend , wonderful investment.
Wish I knew more about covered call plays. Can you recommend any website for direction on how to learn the technique.
Thank you.
06 Jun. 2020
Easy to understand a covered call. The safest option play for the novice. You need to own a hundred shares of a stock to participate. 100 shares = 1 option. With the 100 shares you own you can sell one option on a price you agree to sell your stock at at the end of the options contract date. If the the agreed to price is exceeded by 1 cent the stock is sold automatically at the contract expiration date. Of course you may loose out on the stock run up beyond your agreed to sell price but you did collect the sell price on the option contract. Any leaning center at an on-line broker will provide you an overview of covered calls. Also, the covered call is the easiest option trade to get approved for by the broker.
craftbrewinfo profile picture
Nice article. Thank you. I prefer MO over PM because of the better payout ratio and debt structure. Chuck Carnevale did a nice article recently on debt structures of Corporations and MO and T's were well structured to that of their peers. . MO goes ex-dividend soon as well, so time to add more shares.
I’ll have to pass on MO. After watching my father-in-law die from emphysema after a lifetime of smoking, I can’t in good conscience make/take money from a supplier. There are too many other good companies to choose from to make up for this one.
Regarded Solutions profile picture
craftbrewinfo profile picture
@Regarded Solutions ... yes, I struggled with the morality issues as well, but them came to the mindset that it is a business transaction and is a solid investment for my portfolio. Glad to have this stalwart in my portfolio. PEP on the radar as well! Just haven't got to that one yet... Long MO!
A lot of people struggle with this issue and it is your option but when you consider all the things out there that will take your loved ones' lives including seemingly innocent baby power to air pollution you have to put things into some perspective and realize that mother nature is just lurking out there waiting to prey on you. I've dealt with this issue many times in my 40yrs as an investment advisor.
Buy 1000 shares MO in 2016 at 70 = $70,000
Dividends since 2016 = $13,415
2020 MO price 40 = a loss of $16,585 since 2016

If you really believe MO is a great investment I can get you some UBS mortgage reits for your portfolio, another great recommendation from seeking alpha.
Regarded Solutions profile picture
take a look over 50 years....get back to us with the numbers wise guy.
Interesting Times profile picture
@Regarded Solutions

Don't pick on the newbie ..LOL.. Getting $MO at $40 is a steal.. Thanks for the great article and i wish you well with your health..
@Falcon C46
What you need to learn is how to buy stock. Paying $70 for MO was not exactly brilliant. RS is suggesting it might be worth a look at current levels, not $70. I paid $32 several years ago, sold half my position at $68 and am now enjoying a free ride with oodles of dividends collected over the years. You may want to consider value investing if you're going to stay in this game. Good luck.
You might not "Have To Be A Smoker To Own Altria", but you do have to be a moron to invest in a company that spreads death.
Fangorn profile picture
So you avoid Defence companies, Pharmaceuticals, Oil companies, and a vast variety of other companies with questionable products, or impacts on human life???
Interesting Times profile picture

"but you do have to be a moron to invest in a company that spreads death." I would agree but i would add "unless it pays a 9% dividend" !!

Feel free to call me a moron. I have been called worse..
Interesting Times profile picture

On my blog we talk about vaccines and how so much garbage is added to them that can literally kill you. Does anyone like metal or mercury in your system? I don't ! Many vaccines have it.

How about that BP spill from a few years ago. It ruined the Gulf but people invest in oil.. I could go on and on. You post was spot on ..
I've experimented with nicotine most of my adult life and my conclusion is, there is no future in it.
Putt4doe profile picture
This one I pass on, lost my wife and other loved ones to there product. Also ruined my life as well. Can’t support a company that causes so much pain and sorrow.
Wondering why you even bothered to comment here then...

I also own 3 of your listed stocks...great minds think alike? Haha, nice article.
Silli-Con Doc profile picture
@snappy Tom
The more accurate quote is: “Great minds travel in the same channel.”
Alternatively, “All fools think alike.”
User 10488261 profile picture
Snappy, please note the author has no position in MO. Not that it isn't a bad stock to own but he isn't "with you" on this one.
Wapiti19 profile picture
And will there be a dividend freeze and / or divy cut ???
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