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Altria Selling Portion of ABI Stake, Raises 2024 Guidance

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Image: Altria’s shares reacted positively to news that it would sell a portion of its stake in Anheuser-Busch Inbev. By Brian Nelson, CFA On March 14, Altria Group (MO) announced that it would be selling in a secondary offering 35 million of its ~197 million shares of Anheuser-Busch Inbev (BUD) it owns to unlock value for shareholders. The cigarette maker noted that it would use the proceeds of the sale for accelerated share buybacks to the tune of a $2.4 billion increase to its existing $1 billion repurchase program, a move that we like quite a bit as it helps to reduce total dividend obligations paid to shareholders given Altria’s outsized dividend yield. The cigarette maker also raised its earnings … Read more

We Will Be Removing CubeSmart and Adding Altria to the High Yield Dividend Newsletter Portfolio

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By Brian Nelson, CFA Stock prices and returns are in part a function of a company’s net cash on the balance sheet and changes in future expectations of free cash flow. Stock prices and returns are not driven by the dividend payment, and as such, a myopic focus on the dividend, by itself, could be costing investors considerably, at least with respect to the average market return–as measured by the market-cap weighted S&P 500 (SPY). The free dividends fallacy hypothesized that a myopic focus on chasing dividends could be costing investors anywhere between 2%-4% in returns per annum. During the past 10 years, for example, high-yielding Dividend Aristocrats have trailed the return of the market-cap weighted S&P 500 by about … Read more

Latest Report Updates Reveal Tremendous Dividend Strength at Walmart

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By Brian Nelson, CFA Our latest report updates showcased one very big observation, and that was the tremendous dividend strength of Walmart (WMT). The big box retailer’s Dividend Cushion ratio is rock-solid, and improved inventory management has worked wonders on operating cash flow this year, driving it to $18.2 billion during the six months ended July 31 from $9.24 billion in the same period a year ago, all the while organized retail theft remains a huge industry-wide problem. Though shares of Walmart are widely followed and are fairly valued on the basis of our discounted cash-flow process, we stand in awe of the company’s resurgence in free cash flow generation and believe that the firm offers a nice foundation to … Read more

Altria May Never Make A Comeback

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Image Source: Altria By Brian Nelson, CFA About 15 years ago, I picked up a text from Professor Jeremy Siegel out of the University of Pennsylvania’s Wharton School of Business, The Future for Investors (1). I must have been at one of his talks. I ended up getting a signed copy from him; it was a neat experience. In any case, perhaps one of the more striking takeaways from his 2005 book was the following excerpt: Some readers may be surprised that (Altria) is a top performer for investors in the face of the onslaught of government restrictions and legal actions that have cost the firm tens of billions of dollars and threaten the cigarette manufacturer with bankruptcy. But in … Read more

Earnings Roundup for Week Ended May 17

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Image Shown: We cover several earnings reports in this article across several sectors and industries to provide an overview of how corporates performed during the early stages of the ongoing coronavirus (‘COVID-19’) pandemic. 

Reducing expenses, generating efficiency gains, and ultimately improving the cost structure of corporates appears to be a key theme during the first-quarter 2020 earnings cycle. Management teams across the board are hunkering down and preparing for the pain to continue as global economic activity is expected to grind to a halt in the second quarter of 2020, before recovering somewhat due in part to massive fiscal and monetary stimulus measures that were launched to offset the negative impact COVID-19 is having on economic activity.

High Yield Dividend Newsletter Portfolio Holdings AT&T and Philip Morris International Continue to Shine

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Image Shown: AT&T continues to surge higher this year as shares of T converge towards their intrinsic value, a process supported by recent activist investor activity directed towards the company. If you may wish to add the High Yield Dividend Newsletter to your membership, please click here. By Callum Turcan and Brian Nelson, CFA AT&T On October 28, AT&T Inc (T) reported third-quarter 2019 earnings, and the market clearly liked what the company had to say. Shares of AT&T are trading up ~4% as of this writing as the company’s stock price continues converging towards its intrinsic value, in our view. Our fair value estimate for AT&T stands at $40 per share, with room for upside, and we continue to … Read more

Philip Morris International: Free Cash Flow King With Upside Potential

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Image Shown: Philip Morris International’s Marlboro cigarette brand remains very popular worldwide. Pricing power is essential to offsetting declines in traditional cigarette sales volumes as the company positions itself for alternative tobacco products to become a larger part of its revenue streams. Image Source: Philip Morris International – Third quarter 2019 earnings presentation By Callum Turcan Philip Morris International (PM) posted third quarter 2019 earnings on October 17. As of this writing, Philip Morris International yields 5.8%, and we include shares of PM in our simulated High Yield Dividend Newsletter portfolio. While the company cut its full-year forecast for 2019 partially due to a tax charge, the deconsolidation of a subsidiary, and foreign currency headwinds, Philip Morris International is still … Read more

Altria’s Sprawling Business to Underperform Long-Term Bottom-Line Target in 2019

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Image Source: Melanie Tata Altria’s business has grown increasingly complex recently as it has levered up to add exposure to new growth opportunities. We don’t find the convoluted company attractive, even after considering its lofty yield, and its core cigarette business continues to face material industry-wide volume declines. By Kris Rosemann We extinguished Altria (MO) from the simulated Dividend Growth Newsletter portfolio December 21 after assessing the announcement of its deal to acquire a 35% stake in US e-cigarette leader JUUL Labs. Here’s our conclusion from the announcement of our decision, “Parting with Altria on News of Stake in JUUL:” We think Altria may have thrown in the towel on harvesting its core smoking demographic and may now be entering … Read more

Parting with Altria on News of Stake in JUUL

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Image shown: Altria’s performance during the past couple years. Tobacco giant Altria is working to expand its long-term growth potential away from the secular decline in cigarette volumes via an investment in the leading US e-cigarette company. Unfortunately, we think its large investment in JUUL has put the pace of its dividend growth at risk, and we’re parting with this long-term winner in both simulated newsletter portfolios. We’re also putting Altria’s fair value estimate under review, and we expect to lower it materially in an updated report to be published after the holidays. Technical weakness has also put a damper on our excitement. By Kris Rosemann and Brian Nelson, CFA We’re parting ways in both the simulated Best Ideas Newsletter … Read more

In the News: OPEC Production Cut Agreement, Jobs and Consumer Sentiment, and Altria Gets in the Pot Game

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Let’s take a look at some major headlines. Topics include OPEC’s production cut, the recent jobs and consumer sentiment reports, and Altria’s investment in a marijuana company. By Kris Rosemann OPEC and its allies have reportedly agreed to cut crude oil (USO) production by 1.2 million barrels per day from October production levels as the baseline. The agreement will last for six months and will be reviewed once again in April. OPEC member nations, with the exception of Iran, Libya, and Venezuela, will lower output by 800,000 barrels per day, while Russia and other allies will reduce production by 400,000 barrels per day. The production cut agreement comes shortly after news broke that the US became a net exporter of … Read more