With less than one calendar quarter in the books, the 2024 stock market has already served up a wild ride for investors. The “Magnificent 7” mega-caps are delivering wildly divergent performances, bitcoin (BTCUSD) is racing to multi-year highs, and both oil futures (CLJ24) and gold prices (GCJ24) have been surging right alongside stock prices. As Wall Street prepares to walk headfirst into the latest policy forecast from the Fed this Wednesday, investors are navigating a macroeconomic minefield. Perhaps that's why value plays and dividend stocks have started to regain some popularity among anxious investors, particularly as “bubble” chatter grows around outperforming AI stocks.
In this environment, Altria Group, Inc. (MO) stands out as one stock that's not only a Dividend King - with a history of over 50 years of consistent dividend growth - but is also attractively priced at current levels. While the old-school company only managed one mere mention of "artificial intelligence" in its latest earnings release (and under the “cautionary statements" section, at that), here's a closer look at why investors might want to consider scooping up MO shares at current levels.
About Altria Group Stock
Altria Group, Inc. (MO) is a well-established player in the tobacco industry, though the company has diversified to other vices in response to changing consumer preferences. After the company's investment in vaping giant Juul ran up against significant legal and regulatory challenges, Altria ultimately exited that deal in the first quarter of 2023, exchanging its minority stake for the rights to Juul's heated tobacco IP.
Now, in addition to its trusty Marlboros, Altria's portfolio includes Black & Mild cigars, Skoal chewing tobacco, NJOY e-vapor products, and Zyn nicotine pouches. The company is also invested in Canada's Cronos Group (CRON), giving them a foothold in the cannabis market, and a stake in global brewing giant Anheuser Busch InBev (BUD) - more on that later.
MO stock has been relatively flat over the past 52 weeks, down 1.3% over this time frame. On a YTD basis, though, the shares are up 10.8% to outperform the 8.8% return of the S&P 500 Index ($SPX).
Altria's market cap currently stands at $77.36 billion, with an enterprise value of $99.91 billion. The stock's forward price-to-earnings (P/E) ratio is 8.67, which is a significant discount to the consumer staples sector median of 17.83 - and it's cheaper than MO's own 5-year average P/E multiple of 9.89, too.
Similarly, Altria's forward price/sales ratio is 3.75, which compares favorably to its historical average multiple of 4.04. And the price-to-cash flow (P/CF) ratio of 8.68 likewise represents a discount to the 12.57 sector median, and the stock's 10.07 average valuation.
In other words, it looks like Altria's stock might be somewhat undervalued at current levels.
Altria Impresses on Earnings, Hikes Buybacks
The company's latest earnings results for the fourth quarter of 2023 just dropped on Feb. 1, and Altria beat bottom-line estimates. The company reported adjusted earnings per share (EPS) of $1.18, edging past the consensus analyst estimate of $1.17. Adjusted revenue of $5.02 billion, however, fell narrowly short of the $5.09 billion consensus.
More recently, Altria announced plans to unload roughly one-fifth of its 10% stake in Anheuser Busch InBev, in a move expected to generate over $2 billion. In connection with the stock sale, MO hiked its share buyback program by $2.4 billion.
Plus, the anticipated impact of the transactions boosted MO's full-year guidance, too. The Dividend King now anticipates full-year EPS of $5.05 to $5.17, up from its prior guidance range of $5.00 to $5.15.
Speaking of its dividend, Altria Group offers a healthy 8.94% yield, based on its quarterly dividend of $0.98 per share. They've been increasing dividends every year for the last 54, and the company targets per-share dividend growth in the mid-single digits each year through 2028. In 2023, MO hiked dividends by 4.3%.
What Do Analysts Expect for Altria Stock?
Analysts are estimating Altria will earn $5.06 per share in fiscal year 2024, with revenue edging up to $20.6 billion. These consensus forecasts are near the low end of Altria's guidance, which leaves some scope for an upside surprise on earnings.
Out of 11 analysts throwing their opinions into the ring, the average verdict is a "Hold." Breaking it down, 4 are super bullish with a "Strong Buy," 5 are playing it cool with a "Hold," and 2 are not feeling it, slapping the stock with a “Strong Sell” rating.
In the same cautious vein, the average price target set by analysts is $46.12, just 3.6% north of current prices.
The Bottom Line on Altria Stock
With a juicy 9% yield, over 50 years of raising its dividend payouts, and some smart strategic moves in play to boost its earnings and cash flow, this tobacco titan looks like a bargain right now. Despite mixed analyst opinions, the overall outlook suggests Altria stock is still well-positioned to keep rewarding shareholders - making MO stock a hidden gem worth considering for investors seeking value and income in today's market.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
