It seems impossible to mention the words ‘blue chip’, without also mentioning Altria Group (MO). It has a strong business model, and pays one of the most rock-solid dividends in the entire stock market.
Technically, Altria is not a Dividend Aristocrat. The Aristocrats are a group of 51 stocks in the S&P 500 Index, with 25+ years of consecutive dividend increases. You can see all 51 Dividend Aristocrats here. But this is only because Altria’s various spin-offs over the years have masked its dividend history. Instead, Altria is a Dividend Achiever, which have raised dividends for 10+ years in a row. You can see all 265 Dividend Achievers here.
Altria has increased its dividend 50 times in the past 48 years. Today, it has a 3.4% dividend yield. These qualities make it a blue chip, which we define as companies with 100+ years of dividend payments, and at least a 3% yield. You can see the full list of blue chip stocks here. Altria’s valuation has expanded considerably over the past several years, but it remains a solid blue-chip holding.
Business Overview
Altria is the largest U.S. tobacco company. It manufactures a variety of products, including cigarettes, cigars, and smokeless tobacco products. It also has a wine business, under the Ste. Michelle Wine Estates brand.
The flagship of Altria’s fleet continues to be Marlboro, which dominates the cigarette industry. Marlboro now commands nearly half of U.S. retail share.
Source: 2017 CAGNY Presentation, page 42
In addition, Altria has exposure to the beer industry. It held a 27% ownership stake in global beer giant SABMiller. After SABMiller was acquired by Anheuser Busch Inbev (BUD), Altria now has a 10.2% stake in AB Inbev.
Altria incurred a massive $13.9 billion one-time gain from the SABMiller acquisition last year, which caused GAAP earnings to skyrocket. Reported earnings-per-share soared 173% for 2016, to $7.28. Adjusting for this gain, operating earnings-per-share increased 8.2%, to $3.03. This is obviously a much lower growth rate, but still represents healthy earnings growth from the core business.
