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If you need a reminder that it's always and forever a market of stocks, not a stock market here it is.
Ycharts
Since the value rotation began in early December, Altria (NYSE:MO) has become a Wall Street darling once more.
Ycharts
How is this possible? Long-term rates are rising quickly because we're experiencing the highest inflation in 40 years and rising rates are supposed to be bad for "bond alternatives" like Altria, right?
Bureau of Labor Statistics
Interest rates are soaring, the Fed is tightening and the market is rolling over. This is supposed to hammer value stocks like MO!
But guess what ACTUALLY tends to do well when the Fed is tightening?
Daily Shot 
When rates are rising, growth tends to suffer and value shines.
But guess what does even better than value? High-quality value.
Daily Shot 
And when it comes to high-quality value they literally don't get any better than Ultra SWAN dividend kings.
These are as close to perfect dividend growth blue-chips as exist on Wall Street, and Altria, isn't just an Ultra SWAN dividend king, it's the highest yielding dividend king.
So let's look at the reasons why Altria is one of the highest conviction recommendations in my correction watchlist and the DK Correction Planning Tool.
In other words, let me walk you through why 7% yielding Altria is the perfect dividend aristocrat for 2022 and far beyond.
In fact, even though its up 20% in the last two months, MO is set to soar so much more and is a rich retirement dream stock that can help you achieve your financial dreams.
Reason One: One Of The Safest And Most Dependable Blue-Chips On Earth
The Dividend King's overall quality scores are based on a 236 point model that includes:
dividend safety
balance sheet strength
credit ratings
credit default swap medium-term bankruptcy risk data
short and long-term bankruptcy risk
accounting and corporate fraud risk
profitability and business model
growth consensus estimates
historical earnings growth rates
historical cash flow growth rates
historical dividend growth rates
cost of capital
long-term risk-management scores from MSCI, Morningstar, FactSet, S&P, Reuters'/Refinitiv and Just Capital
management quality
dividend friendly corporate culture/income dependability
long-term total returns (a Ben Graham sign of quality)
analyst consensus long-term return potential
It actually includes over 1,000 metrics if you count everything factored in by 12 rating agencies we use to assess fundamental risk.
credit and risk management ratings make up 41% of the DK safety and quality model
dividend/balance sheet/risk ratings make up 82% of the DK safety and quality model
How do we know that our safety and quality model works well?
During the two worst recessions in 75 years, our safety model predicted 87% of blue-chip dividend cuts during the ultimate baptism by fire for any dividend safety model.
How does Altria score on one of the world's most comprehensive and accurate safety and quality models?
Dividend Safety
| Rating | Dividend Kings Safety Score (143 Point Safety Model) | Approximate Dividend Cut Risk (Average Recession) | Approximate Dividend Cut Risk In Pandemic Level Recession |
| 1 - unsafe | 0% to 20% | over 4% | 16+% |
| 2- below average | 21% to 40% | over 2% | 8% to 16% |
| 3 - average | 41% to 60% | 2% | 4% to 8% |
| 4 - safe | 61% to 80% | 1% | 2% to 4% |
| 5- very safe | 81% to 100% | 0.5% | 1% to 2% |
| MO | 91% | 0.50% | 1.50% |
| Risk Rating | Low-Risk (61st percentile risk management consensus) | BBB stable 7.5% 30-year bankruptcy risk | 20% OR LESS Max Risk Cap Recommendation (Individual Companies) |
Long-Term Dependability
| Company | DK Long-Term Dependability Score | Interpretation | Points |
| Non-Dependable Companies | 21% or below | Poor Dependability | 1 |
| Low Dependability Companies | 22% to 60% | Below-Average Dependability | 2 |
| S&P 500/Industry Average | 61% (58% to 70% range) | Average Dependability | 3 |
| Above-Average | 71% to 80% | Very Dependable | 4 |
| Very Good | 81% or higher | Exceptional Dependability | 5 |
| MO | 83% | Exceptional Dependability | 5 |
Overall Quality
| MO | Final Score | Rating |
| Safety | 90% | 5/5 very safe |
| Business Model | 80% | 3/3 wide moat |
| Dependability | 81% | 5/5 exceptional |
| Total | 88% | 13/13 Ultra SWAN Dividend King |
| Risk Rating | 3/3 Low-Risk | |
| 20% OR LESS Max Risk Cap Rec (Speculative) | 5% Margin of Safety For A Potentially Good Buy |
MO: The 66th Highest Quality Master List Company (Out of 509) = 87th Percentile
The DK 500 Master List includes the world's highest quality companies including:
All dividend champions
All dividend aristocrats
All dividend kings
All global aristocrats (such as BTI, ENB, and NVS)
All 13/13 Ultra Swans (as close to perfect quality as exists on Wall Street)
- 46 of the world's best growth stocks (on its way to 50)
MO's 88% quality score means its similar in quality to such blue-chips as
- McCormick (MKC) - dividend aristocrat
- Ecolab (ECL) - dividend aristocrat
- Automatic Data Processing (ADP) - dividend aristocrat
- 3M (MMM) - dividend king
- NVIDIA (NVDA)
- Mastercard (MA)
- Visa (V)
- Philip Morris International (PM) - dividend king
- Abbott Labs (ABT) - dividend king
- Walmart (WMT) - dividend aristocrat
Even among the highest quality companies on earth, MO is higher quality than 87% of them.
Why is that?
Altria was founded in 1919 in Richmond, Virginia, and is the single best performing stock in history.
- 173,000X inflation-adjusted returns over 90 years
The investment thesis is 100% focused on the company's transition to a smoke-free future.
- cigarette volumes have been falling for over 50 years
- rising cigarettes volumes have nothing to do with MO's long-term investment thesis
Investment Thesis Summary
Although it is in secular contraction, the U.S. cigarette market is a relatively attractive one.
We forecast the volume decline rate of the U.S. cigarette to be around 4% per year, a slightly faster rate of decline than most markets.
However, the ability to consistently price above the rate of volume declines should ensure that Altria can continue to increase its revenue, earnings, and dividend.
We estimate that the U.S. is the fourth most affordable market for cigarettes among the OECD countries, as measured by the minutes of labor required to meet the retail price of a pack of 20 sticks. This allows manufacturers ample room for raising prices over time. " - Morningstar
Earnings Update
Altria grew its 2021 adjusted diluted earnings per share by 5.7%, driven in part by the resiliency of our cigarette, cigar and moist smokeless tobacco businesses. Additionally, we returned more than $8.1 billion in cash to shareholders through dividends and share repurchases. This total represents the third largest single year cash return in Altria's history and the largest annual return since 2002." - CFO, Q4 conference call
Altria has grown its earnings every year since 2003 when EPS fell 2%.
That's how stable this company's business model is.
Thanks to strong growth in reduced-risk products, or RRPs, overall volumes are declining at a very modest rate of 0.8%.
- price increases are more than sufficient to keep revenue growing
MO's nicotine pouches are rapidly gaining market share, quadrupling from 1.1% to 3.9% of all US oral tobacco market share in just the last year.
on! is now the 2nd most popular nicotine pouch brand and saw its market share expand by 38% in 2021.
Before PM had to pull iQos for litigation reasons, its adoption trend was similar to iQos in other countries.
Altria has filed with the FDA to expand its RRP offerings even more.
MO's cost increases are staying ahead of inflation and keeping operating margins strong and growing.
Volume decline rates are back to pre-pandemic levels.
- just 0.3% in 2021 thanks to RRPs
Overall, it was a very successful year for MO as it works on its long-term plan to
- transition to a smoke-free future
- replace tobacco with RRPs (heat sticks, vaping, and nicotine pouches)
- raise prices faster than volume declines to grow revenue
- cut costs to increase margins
- a healthy amount of buybacks increase per share growth rate to 5% to 7% CAGR
MO Credit Ratings
| Rating Agency | Credit Rating | 30-Year Default/Bankruptcy Risk | Chance of Losing 100% Of Your Investment 1 In |
| S&P | BBB stable | 7.50% | 13.3 |
| Fitch | BBB stable | 7.50% | 13.3 |
| Moody's | A3 (A- equivalent) stable | 2.50% | 40.0 |
| Consensus | BBB+ stable | 5.83% | 17.1 |
(Sources: S&P, Fitch, Moody's)
MO's balance sheet is strong and getting steadily stronger.
MO Leverage Consensus Forecast
| Year | Debt/EBITDA | Net Debt/EBITDA (3.0 Or Less Safe According To Credit Rating Agencies) | Interest Coverage (8+ Safe) |
| 2020 | 2.52 | 2.10 | 9.63 |
| 2021 | 2.34 | 2.10 | 10.05 |
| 2022 | 2.22 | 2.09 | 11.26 |
| 2023 | 2.19 | 2.00 | 11.84 |
| 2024 | 2.02 | 1.91 | 14.86 |
| 2025 | 2.11 | 1.85 | NA |
| Annualized Change | -3.53% | -2.53% | 11.44% |
(Sources: FactSet Research Terminal)
MO Balance Sheet Consensus Forecast
| Year | Total Debt (Millions) | Cash | Net Debt (Millions) | Interest Cost (Millions) | EBITDA (Millions) | Operating Income (Millions) | Average Interest Rate |
| 2020 | $29,471 | $4,945 | $24,526 | $1,205 | $11,695 | $11,609 | 4.09% |
| 2021 | $28,127 | $2,957 | $25,273 | $1,176 | $12,044 | $11,814 | 4.18% |
| 2022 | $27,836 | $4,054 | $26,300 | $1,101 | $12,556 | $12,398 | 3.96% |
| 2023 | $28,241 | $4,463 | $25,791 | $1,071 | $12,916 | $12,683 | 3.79% |
| 2024 | $26,575 | $2,957 | $25,023 | $870 | $13,132 | $12,928 | 3.27% |
| 2025 | $27,685 | $2,957 | $24,265 | NA | $13,151 | $13,151 | NA |
| Annualized Growth | -1.24% | -9.77% | -0.21% | -7.82% | 2.37% | 2.53% | -5.41% |
(Sources: FactSet Research Terminal)
- debt is drifting lower
- cash flows are slowly but steadily growing
- interest costs are 4.17% and falling and are expected to reach 3.3% by 2024.
- 0.6% adjusted for inflation, vs 28% cash returns on invested capital
MO Bond Profile
- debt/EBITDA well below the 3.0 rating agencies consider safe for this industry
- $6 billion in liquidity
- well-staggered bond maturities (no issues refinancing maturing debt)
- 100% unsecured bonds (maximum financial flexibility)
- bond investors so confident in MO's smoke-free future they are willing to lend to it for 39 years at 4.7%
MO Credit Default SWAPs: The Bond Market's Real-Time Fundamental Risk Estimate
FactSet Research Terminal
Credit default swaps are insurance policies taken out by bond investors in case a company defaults (goes bankrupt).
- they serve as a real-time fundamental risk-assessment from "the smart money" on Wall Street
- including the latest news that can cause stock prices to be extremely volatile
- MO's 10-year CDS are consistent with a BBB+ credit rating
- and its CDS are relatively stable over time, much more so than the stock price
The bond market agrees with analysts, management, and rating agencies that MO's investment thesis is intact.
Profitability: Wall Street's Favorite Quality Proxy
MO's profitability is historically in the top 20% of its peers (a famously high-margin industry).
MO Trailing 12-Month Profitability Vs Peers
| Metric | Industry Percentile | Major Tobacco Companies More Profitable Than MO (Out Of 47) |
| Operating Margin | 95.45 | NA |
| Net Margin | 50.00 | 24 |
| Return On Equity | 94.87 | 2 |
| Return On Assets | 34.04 | 31 |
| Return On Capital | 85.11 | 7 |
| Average | 71.89 | 13 |
(Source: GuruFocus Premium)
Some pandemic-related expenses temporarily reduced profitability to the 72nd percentile.
MO's profitability has been stable for decades, and its free cash flow margins, which directly support the growing dividend, are in the top 5% of all global companies.
- nearly 2X that of Apple
MO Profit Margin Consensus Forecast
| Year | FCF Margin | EBITDA Margin | EBIT (Operating) Margin | Net Margin | Return On Capital Expansion | Return On Capital Forecast |
| 2020 | 39.1% | 56.1% | 55.7% | 38.9% | 1.05 | |
| 2021 | 38.3% | 57.1% | 56.0% | 40.4% | TTM ROC | 284.95% |
| 2022 | 41.1% | 59.2% | 58.4% | 41.3% | Latest ROC | 711.95% |
| 2023 | 39.5% | 60.0% | 58.9% | 42.4% | 2026 ROC | 299.53% |
| 2024 | 42.0% | 62.2% | 61.2% | 45.2% | 2026 ROC | 748.39% |
| 2025 | NA | 58.8% | 58.8% | 42.8% | Average | 523.96% |
| 2026 | NA | NA | NA | NA | Industry Median | 63.84% |
| Annualized Growth | 1.82% | 0.95% | 1.10% | 1.90% | MO/Peers | 8.21 |
| Vs S&P | 35.89 |
(Sources: FactSet Research Terminal)
MO's margins are expected to modestly increase in the coming years.
Including FCF margins of 42%, in the top 5% of all global companies.
Returns on capital = annual pre-tax profit/operating capital (the money it takes to run the business).
- Joel Greenblatt's gold standard of profitability and moatiness
MO's ROC is expected to be 8X that of its peers, and 36X that of the S&P 500.
- according to one of the greatest investors in history MO's quality is 36X greater than the average S&P 500 company
MO's ROC has been doubling every decade for 30 years.
MO Dividend Growth Consensus Forecast
| Year | Dividend Consensus | EPS/Share Consensus | Payout Ratio | Retained (Post-Dividend) Cash Flow | Buyback Potential | Debt Repayment Potential |
| 2021 | $3.52 | $4.61 | 76.4% | $1,987 | 2.13% | 7.1% |
| 2022 | $3.76 | $4.87 | 77.2% | $2,024 | 2.16% | 7.2% |
| 2023 | $4.08 | $5.16 | 79.1% | $1,969 | 2.11% | 7.1% |
| 2024 | $4.26 | $5.42 | 78.6% | $2,115 | 2.26% | 7.5% |
| 2025 | NA | $5.57 | NA | NA | NA | NA |
| Total 2021 Through 2024 | $15.62 | $20.06 | 77.9% | $8,094.12 | 8.66% | 28.78% |
| Annualized Rate | 6.57% | 4.84% | 0.97% | 2.10% | 2.10% | 1.96% |
(Sources: FactSet Research Terminal)
Rating agencies consider 85% to be a safe payout ratio for this industry.
- MO's company policy 80% payout ratio
- PM's policy 75%
- BTI's policy 65%
MO has raised its dividend every year for the last 52 years.
Ben Graham considered 20+ years without a dividend cut as a sign of quality. 20+ year growth streaks are a sign of excellence. And MO's streak is nearly 3X that long.
MO's $8 billion in post-dividend retained earnings is enough to pay down 30% of its current debt or buy back 9% of its stock at current valuations.
| Year | Consensus Buybacks ($ Millions) | % Of Shares (At Current Valuations) |
| 2021 | $1,700.00 (Official) | 1.8% |
| 2022 | $1,900.00 | 2.0% |
| 2023 | $1,660.00 | 1.8% |
| 2024 | $2,000.00 | 2.1% |
| 2025 | $3,000.00 | 3.2% |
| Total 2021 Through 2024 | $10,260.00 | 11.0% |
| Annualized Rate | 2.30% |
(Sources: FactSet Research Terminal)
MO's buybacks are expected to accelerate and help boost growth to about 5% to 6% per year.
But I know that many MO investors worry that MO's growth prospects are too weak to support a safe dividend or good long-term return potential.
So let me put your mind at ease.
Reason Two: Steady Growth Prospects For Decades To Come
Altria's top and bottom lines aren't growing fast, but they are growing.
MO Medium-Term Consensus Forecast
| Year | Sales | Free Cash Flow | EBITDA | EBIT (Operating Income) | Net Income |
| 2020 | $20,841 | $8,154 | $11,695 | $11,609 | $8,117 |
| 2021 | $21,111 | $8,079 | $12,044 | $11,814 | $8,519 |
| 2022 | $21,212 | $8,716 | $12,556 | $12,398 | $8,758 |
| 2023 | $21,526 | $8,493 | $12,916 | $12,683 | $9,123 |
| 2024 | $21,123 | $8,882 | $13,132 | $12,928 | $9,547 |
| 2025 | $22,356 | NA | $13,151 | $13,151 | $9,567 |
| Annualized Growth | 1.41% | 2.16% | 2.37% | 2.53% | 3.34% |
(Sources: FactSet Research Terminal)
Including buybacks, which MO has been using for 50+ years to drive exceptional returns, growth per share in all fundamentals is expected to be steady in the coming years.
| Metric | 2020 Actual Growth | 2021 consensus growth | 2022 consensus growth | 2023 consensus growth | 2024 consensus growth | 2025 consensus growth |
| Sales | 6% | 2% | 0% | 0% | 3% | 6% |
| Dividend | 4% | 2% | 5% | 9% | 4% | NA |
| EPS | 3% | 6% | 5% | 6% | 5% | 3% |
| Operating Cash Flow | 8% | -18% | 28% | 3% | 7% | 1% |
| Free Cash Flow | 8% | 2% | -9% | 3% | NA | NA |
| EBITDA | 5% | 9% | 3% | 2% | NA | NA |
| EBIT (operating income) | 5% | 45% | -22% | 3% | -1% | NA |
(Sources: FAST Graphs, FactSet Research Terminal)
This is a dying company, but a steadily growing, recession-resistant one.
The last time MO reported negative earnings growth was -2% in 2003.
OK, but what about the long-term?
MO Long-Term Growth Outlook
- 5.3% CAGR growth consensus
- from FAST Graphs, FactSet, Ycharts, and Reuters
- every source agrees, MO is likely to grow about 5%
How often are analysts wrong about MO's growth?
Other than the pandemic, MO hasn't missed 2-year estimates in a decade.
Margins of error 5% to the upside and downside.
- 5% to 6% CAGR margin-of-error adjusted growth consensus range
Faster volume declines in the US are expected to result in 3% slower growth than in the past, 5% vs 8%.
- which is why we use the low end of the historical 14 to 17 PE market-determined fair value range
- 14 PE requires 2.75% CAGR growth according to the Graham/Dodd fair value formula
In other words, MO is NOT a dying company.
It's not in secular decline unless you think that growing sales, cash flow, and dividends for 50+ years and delivering the best returns in history is a "secular decline".
And despite its strong showing in 2022, MO is still a wonderful high-yield dividend aristocrat bargain.
Reasons Three: A Wonderful Company At A Wonderful Price
Outside of bear markets and bubbles, tens of millions of investors have paid between 14 to 17X earnings.
- 91% statistical probability that 14 to 17X earnings is intrinsic value for MO
| Metric | Historical Fair Value Multiples (all-years) | 2021 | 2022 | 2023 | 2024 | 2025 | 12-Month Forward Fair Value |
| Sales | 3.66 | $41.83 | NA | NA | $43.15 | $45.02 | |
| 5-Year Average Yield | 6.65% | $54.14 | $54.14 | $54.14 | $64.06 | NA | |
| 13-Year Median Yield | 4.96% | $72.58 | NA | NA | $85.89 | NA | |
| 25-year average yield | 5.36% | $67.16 | $67.16 | $67.16 | $79.48 | NA | |
| Earnings | 13.97 | $64.48 | $67.87 | $71.78 | $75.72 | $77.81 | |
| Operating Cash Flow | 14.45 | $53.20 | $67.89 | $70.25 | $79.62 | $80.05 | |
| Free Cash Flow | 14.55 | $62.28 | $65.54 | $65.54 | NA | NA | |
| EBITDA | 8.52 | $57.93 | $57.97 | $59.00 | NA | NA | |
| EBIT (operating income) | 8.94 | $76.74 | $59.64 | $60.87 | $60.87 | NA | |
| Average | $59.33 | $62.44 | $63.54 | $66.54 | $62.57 | $62.57 | |
| Current Price | $50.24 | ||||||
Discount To Fair Value | 15.32% | 19.54% | 20.93% | 24.49% | 19.71% | 19.71% | |
Upside To Fair Value (NOT Including Dividends) | 18.09% | 24.29% | 26.48% | 32.44% | 24.54% | 24.54% (31.7% including dividend) | |
| 2022 EPS | 2023 EPS | 2021 Weighted EPS | 2022 Weighted EPS | 12-Month Forward EPS | 12-Month Average Fair Value Forward PE | Current Forward PE | |
| $4.86 | $5.14 | $4.30 | $0.59 | $4.89 | 12.8 | 10.3 |
Altria is still 20% conservatively undervalued and is trading at just 10.3X earnings.
If it returned to fair value over the next year, investors would enjoy a 32% total return.
Do you know how often long-term investors have regretted buying MO at 10.3X earnings? Never, as long as they avoided becoming forced sellers for emotional or financial reasons.
| Rating | Margin Of Safety For Low-Risk 13/13 Ultra SWAN Quality Companies | 2022 Price | 2023 Price | 12-Month Forward Fair Value |
| Potentially Reasonable Buy | 0% | $62.44 | $63.54 | $62.53 |
| Potentially Good Buy | 5% | $59.32 | $60.37 | $59.40 |
| Potentially Strong Buy | 15% | $53.08 | $54.01 | $53.15 |
| Potentially Very Strong Buy | 25% | $44.49 | $47.66 | $46.90 |
| Potentially Ultra-Value Buy | 35% | $40.59 | $41.30 | $40.64 |
| Currently | $50.24 | 18.52% | 19.93% | 19.71% |
Upside To Fair Value (Not Including Dividends) | 22.73% | 24.89% | 24.54 |
For anyone comfortable with its risk profile, MO is a potentially strong buy, and here's why.
MO's Consensus Total Return Potential Puts The S&P To Shame
For context, here's the return potential of the 21% overvalued S&P 500.
| Year | EPS Consensus | YOY Growth | Forward PE | Blended PE | Overvaluation (Forward PE) | Overvaluation (Blended PE) |
| 2021 | $204.35 | 49.07% | 23.5 | 24.4 | 36% | 39% |
| 2022 | $223.21 | 9.23% | 20.6 | 22.0 | 19% | 25% |
| 2023 | $246.41 | 10.39% | 18.6 | 19.6 | 8% | 11% |
| 2024 | $275.06 | 11.63% | 16.7 | 17.6 | -3% | 0% |
| 12-Month forward EPS | 12-Month Forward PE | Historical Overvaluation | PEG | 25-Year Average PEG | S&P 500 Dividend Yield | 25-Year Average Dividend Yield |
| $225.02 | 20.386 | 21.13% | 2.40 | 3.62 | 1.40% | 2.01% |
(Source: DK S&P 500 Valuation And Total Return Tool) updated weekly
Stocks have already priced in all of the 100% EPS growth from 2020 through 2024 and are trading at 20.4 forward earnings.
- 16.84 is the 25-year average
- 17.3% correction needed to get back to historical market fair value
S&P 500 2023 Consensus Total Return Potential
FAST Graphs, FactSet Research
Analysts expect the S&P 500 to deliver potentially -10% total returns over the next two years.
| Year | Upside Potential By End of That Year | Consensus CAGR Return Potential By End of That Year | Probability-Weighted Return (Annualized) | Inflation And Risk-Adjusted Expected Returns |
| 2027 | 31.32% | 5.60% | 4.20% | 1.47% |
(Source: DK S&P 500 Valuation And Total Return Tool) updated weekly
Adjusted for inflation, the risk-expected returns of the S&P 500 are about 2% for the next five years.
- S&P's historical inflation-adjusted returns are 6% to 7% CAGR
| S&P Earnings Yield | 10-Year US Treasury Yield | Earning Yield Risk-Premium |
| 4.91% | 1.99% | 2.92% (3.7% 10 and 20-year average) |
| Theoretical Interest Rate Justified Market Fair Value Forward PE | Current PE | Theoretically Interest Rate Justified Market Decline |
| 17.57 | 20.39 | 13.79% |
(Source: DK S&P 500 Valuation And Total Return Tool) updated weekly
Even adjusting for low (and rising) interest rates, stocks still require a 14% correction before they become theoretically fairly valued.
But here's what investors buying MO today can reasonably expect.
- 5-year consensus return potential range: 14% to 19% CAGR
MO 2023 Consensus Total Return Potential
FAST Graphs, FactSet Research
According to analysts, MO could deliver 20% annual returns over the next two years.
- literally, Buffett-like returns from a blue-chip bargain hiding in plain sight
MO 2027 Consensus Total Return Potential
FAST Graphs, FactSet Research
MO has the potential to deliver 117% total returns or 14% annually, over the next five years.
That's nearly 4X more than the S&P 500 consensus. And you get paid a very safe and steadily growing 7.2% yield while you wait for those strong potential returns.
| Investment Strategy | Yield | LT Consensus Growth | LT Consensus Total Return Potential | Long-Term Risk-Adjusted Expected Return | Long-Term Inflation And Risk-Adjusted Expected Returns |
| Altria | 7.2% | 5.3% | 12.5% | 8.8% | 6.5% |
| Safe Midstream + Growth | 3.3% | 8.5% | 11.8% | 8.3% | 6.0% |
| REITs | 3.0% | 7.0% | 9.9% | 6.9% | 4.7% |
| High-Yield | 2.7% | 11.3% | 14.0% | 9.8% | 7.5% |
| Dividend Aristocrats | 2.2% | 8.9% | 11.1% | 7.8% | 5.5% |
| Value | 2.1% | 12.1% | 14.1% | 9.9% | 7.6% |
| 10-Year US Treasury | 2.0% | 0.0% | 2.0% | 1.4% | -0.9% |
| 60/40 Retirement Portfolio | 1.9% | 5.1% | 7.0% | 4.9% | 2.6% |
| REITs + Growth | 1.8% | 8.9% | 10.6% | 7.4% | 5.2% |
| High-Yield + Growth | 1.7% | 11.0% | 12.7% | 8.9% | 6.6% |
| Dividend Growth | 1.6% | 12.6% | 14.2% | 9.9% | 7.7% |
| S&P 500 | 1.4% | 8.5% | 9.9% | 6.9% | 4.7% |
| Nasdaq (Growth) | 0.7% | 10.7% | 11.4% | 8.0% | 5.7% |
(Source: Morningstar, FactSet, Ycharts)
How would you like to beat the S&P, aristocrats, and Nasdaq in the coming years and decades? And how you like to earn a very safe and steadily growing 7.2% yield while you do it?
MO Investment Decision Score
Dividend Kings DK Automated Investment Decision Tool
For anyone comfortable with its risk profile, MO is one of the best high-yield blue-chips you can buy today.
- almost 5X the market's yield
- a much safer yield
- much higher quality
- and more than 2X the risk-adjusted expected returns
Risk Profile: Why Altria Isn't Right For Everyone
There are no risk-free companies and no company is right for everyone. You have to be comfortable with the fundamental risk profile.
MO's Risk Profile Summary
- regulatory risk (plain packaging laws, menthol ban, nicotine level regulation, reduced risk product taxation)
- smoke-free transition execution: 1-year setback in iQos rollout due to BTI patent lawsuit
- margin compression risk: RRPs could have lower margins than legacy products
- M&A execution risk (Juul and Cronos investments thus far have not gone well)
- labor retention risk (tightest job market in over 50 years and finance is a high paying industry)
How do we quantify, monitor, and track such a complex risk profile? By doing what big institutions do.
Material Financial ESG Risk Analysis: How Large Institutions Measure Total Risk
- 4 Things You Need To Know To Profit From ESG Investing
- What Investors Need To Know About Company Long-Term Risk Management (Video)
Here is a special report that outlines the most important aspects of understanding long-term ESG financial risks for your investments.
- ESG is NOT "political or personal ethics based investing"
- it's total long-term risk management analysis
ESG is just normal risk by another name." Simon MacMahon, head of ESG and corporate governance research, Sustainalytics" - Morningstar
ESG factors are taken into consideration, alongside all other credit factors, when we consider they are relevant to and have or may have a material influence on creditworthiness." - S&P
ESG is a measure of risk, not of ethics, political correctness, or personal opinion.
S&P, Fitch, Moody's, DBRS (Canadian rating agency), AMBest (insurance rating agency), R&I Credit Rating (Japanese rating agency), and the Japan Credit Rating Agency have been using ESG models in their credit ratings for decades.
- credit and risk management ratings make up 41% of the DK safety and quality model
- dividend/balance sheet/risk ratings make up 82% of the DK safety and quality model
Dividend Aristocrats: 67th Industry Percentile On Risk Management (Above-Average, Medium Risk)
MO's Long-Term Risk Management Consensus
| Rating Agency | Industry Percentile | Rating Agency Classification |
| MSCI 37 Metric Model | 58.0% | BBB Average |
| Morningstar/Sustainalytics 20 Metric Model | 89.5% | 24.6/100 Medium-Risk |
| Reuters'/Refinitiv 500+ Metric Model | 94.0% | Excellent |
| S&P 1,000+ Metric Model | 36.0% | Below Average (Negative Trend) |
| Consensus | 69.4% | Above-Average (bordering on good) |
| FactSet Qualitative Assessment | Average | Stable Trend |
(Sources: MSCI, Morningstar, Reuters', JustCapital, S&P, FactSet Research)
MO's Long-Term Risk Management Is The 200th Best In The Master List (60th Percentile)
MO's risk-management consensus is in the top 40% of the world's highest quality companies and similar to that of such other companies as
- Royal Bank of Canada (RY)
- Qualcomm (QCOM)
- Magellan Midstream Partners (uses K-1) (MMP)
- Alphabet (GOOG)
- Consolidated Edison (ED) - dividend aristocrat
- PPG Industries (PPG) - dividend aristocrat
- Ecolab (ECL) - dividend aristocrat
The bottom line is that all companies have risks, and MO is above-average at managing theirs.
How We Monitor MO's Risk Profile
- 20 analysts
- 3 credit rating agencies
- 7 total risk rating agencies
- 27 experts who collectively know this business better than anyone other than management
- and the bond market, the "smart money" on Wall Street, providing real-time fundamental risk updates
When the facts change, I change my mind. What do you do sir?" - John Maynard Keynes
There are no sacred cows at iREIT or Dividend Kings. Wherever the fundamentals lead we always follow. That's the essence of disciplined financial science, the math retiring rich and staying rich in retirement.
Bottom Line: 7% Yielding Altria Is The Perfect Dividend Aristocrat For 2022
It's been a tough year for the stock market, but guess what's having a great year? Ultra SWAN value is the new tech, and one of the only things working right now.
But my goal isn't to help you make a lot of money in 2022. I want to help you retire in safety and splendor in the coming years and decades.
Reasons To Potentially Buy Altria
- 88% quality low-risk 13/13 Ultra SWAN dividend king
- very safe 7.2% yielding, 91% dividend safety score
- 20% undervalued (potential strong buy)
- 10.3 X earnings vs 14 to 17 historical
- BBB stable credit rating = 7.5% 30-year bankruptcy risk
- risk management consensus 69th industry percentile = above-average
- 5% to 6% CAGR margin-of-error growth consensus range
- 5% to 7% CAGR pre-pandemic growth management guidance
- 5.3% CAGR median growth consensus
- 5-year consensus total return potential: 14% to 19% CAGR
- base-case 5-year consensus return potential: 14% CAGR
- consensus 12-month total return forecast: 12%
- 12-month fair value justified upside potential: 31%
Altria is a rich retirement dividend dream stock, an Ultra SWAN dividend king, that is the perfect value stock for 2022.
MO's track record of adapting and overcoming its numerous challenges over time is exceptional.
And today, despite a 20% two-month rally, MO is still trading at highly attractive private equity valuations.
That's why MO is a coiled spring set to soar.
That's why I bought more MO in this correction.
That's while I'll keep buying more MO in the future.
And you might want to do the same.
Luck is what happens when preperation meets opportunity." - Roman philospher Seneca the younger
If you're tired of spinning your wheels with day trading, market timing, dangerous speculation, and just plain losing money, maybe it's time to trust Ultra SWAN aristocrats to make you rich.
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