Best Ideas and Dividend Growth portfolio holding Altria (click ticker for report: ) announced today that it will hike its quarterly dividend 7.3% to $0.44 (slightly better than we had expected). We’ve been huge fans of the firm’s return prospects since we initiated a position in the portfolio of our Best Ideas Newsletter over a year ago. We also hold the name in the portfolio of our Dividend Growth Newsletter, and we think shares still have valuation upside.
All US tobacco companies achieved a victory today when the US appellate court ruled 2-1 against the Food & Drug Administration’s new regulations mandating that cigarette makers put vivid graphics showcasing the negative impacts of smoking. The court ruled that the regulation did indeed violate First Amendment rights.
The US would not have been the first to place such pictures on packaging. New Zealand, Singapore and the United Kingdom have mandated it for years. Each of these nations claims the pictures will reduce the overall smoking rate, but we do not think a final ruling one way or the other will have a significantly material long-term impact on cigarette smoking in the United States, and by proxy, Altria. The dangers of smoking are well known in the US, in our view-whether smokers choose to ignore them or not cannot be decided by anyone but the individual consumer.
Still, we think the victory is ultimately a positive for Altria as it won’t have to spend money on compliance. And the company remains one of our favorite dividend growth gems.
Please click the following link for our Dividend Report on Altria: