Assessing The Dividend Quality Of Altria And The Tobaccos

Since Altria (NYSE: MO) and its tobacco peers are major dividend-oriented companies, I felt that it is necessary to show interested investors a deeper dive into the quality of their dividends. Over time, it is without a doubt that the tobacco industry has been consistently been able to pay increasingly higher dividends back to its shareholders while having fabulous capital gains. In my earlier article on Altria, I broke down and determined the company's intrinsic valuation due to its exposure to SABMiller (OTCPK: SBMRY). Overall, if successful, the brewery merger will make for a large impact on Altria's earnings and dividends in the future. Below includes the tobacco industry's year-end share price appreciation and total returns data. It is not surprising that many of the largest players such as Altria and Reynolds American (NYSE: RAI) have produced the highest total share price returns over time (i.e. 5.5Y∆).
Data sourced from Morningstar
When assessing dividends, many investors typically use dividend yield, dividend payout and dividend growth to measure its quality. With many of the companies in the industry having very similar results, it is often difficult to determine which one is going to do better than the other. You might be asking yourself "I mean as long as they are paying a high dividend does it even matter?" Unfortunately it does matter as there are many companies out there that pay very high dividend yields but are paying in excess of what... Read more