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Some companies are unmatched on the rate at which they pay out their dividends. Former DJIA component Altria Group, Inc. (NYSE: MO) definitely falls into that category, as do many tobacco sector peers. Today came the announcement that it is increasing its quarterly dividend by over 6% to $0.34 per share of common stock per quarter. The prior quarterly dividend rate was $0.32 per quarter. At an annualized rate of $1.36 per share and with shares at $18.15, this generates a yield right at 7.5% per year. The risk-free yield of the comparable Treasury is about 0.44% and the average yield of all S&P 500 stocks is roughly 1.88%. What we are curious about is how long through time Altria can keep paying dividend rates of this magnitude.
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Posts related to ‘Tobacco’
Can Altria Raise Dividend Indefinitely? (MO, PM, RAI, LO)
Tracking The Value Of The World’s Major Brands
Several companies run annual brand valuations. It is a good business for advertising and marketing firms to be viewed as experts on brands. Brand values are based on the cash flow they create, and there are a number of ways to measure that. The mathematical parts of the formulas are relatively easy. The part that is hard, because it requires skilled forecasting, is what the reputation and value of a brand is likely to be three or four years from the date the values are set. It would have been hard half a decade ago to predict that AIG (AIG), the brand of the world’s largest insurance company, would be virtually worthless today, or that Facebook would be an extremely valuable brand. There is both art and science to determining the future of brands. Read More
Between Patents And The FDA, Big Tobacco Smokes (MO)(RIA)(STSI)
Big tobacco got over yet another big news hurdle yesterday after a U.S. District Court sided with Reynolds American (RAI) in its long-running patent tussle with Star Scientific (STSI), this on the heels of new FDA regulations passed by Congress last week. Read More
The Tobacconist’s Lament: The Government’s Campaign Against Cigarettes And Fast Food
Congress has finally come within a day or two of finalizing a bill the will have the FDA regulate the tobacco industry. The markets of cigarettes, cigars, and chew have avoided the government’s boot heel for decades. The only challenge to the sector’s phenomenal cash flow has been a string of liability suits accusing firms like Altria (MO) of knowingly selling carcinogens to the general population which dodging the health hazards of smoking. The industry has, in general, gotten off lightly in the court system. Read More
Another Legal Medical Marijuana Company Now Public (GFON, CVIV)
Cannabis Science, Inc. (OTCBB: GFON), or Gulf Onshore, Inc. (GFON), is yet another public stock company which is going after the field of legalized medical marijuana. Just last week the company was called Gulf Onshore and it just changed its name to Cannabis Science, Inc. after acquiring the assets of Cannex Therapeutics LLC about 10 days ago. Last week the company also announced that it had selected its first pharmaceutical cannabis product for FDA testing. It was not even two weeks ago that a company called Medical Marijuana, Inc. (OTC: CVIV) had pursued a similar strategy in coming public after formerly being called Club Vivanet.
Legalized Medical Marijuana Company Now Public Stock, Really (CVIV)
If you thought that the legalized marijuana for medicinal purposes was a controversial, imagine how controversial it would be if a company was public in the sector of legalized marijuana. Forget the “if” in the equation. This week, a small and formerly unknown company called Club Vivanet announced that it is the first public company to enter the legalized, medical marijuana business. The company even changed its name to Medical Marijuana, Inc. While it does not trade on the NYSE nor on the NASDAQ, the stock does trade over-the-counter under the ticker “CVIV” and is listed as Medical Marijuana, Inc. (OTC: CVIV) on the pink sheets.
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Universal Files To Raise Cash (UVV)
Universal Corporation (NYSE: UVV) has filed an automatic shelf registration statement with the SEC that will allow it from time to time to sell securities. The leaf tobacco merchant and processor will be able to sell any combination of debt securities, preferred stock, common stock, warrants, stock purchase contracts, and units.
The Credit Markets Emasculated: Altria (MO) Delays Deal, Or Kills It
As long as companies in the "smokes" business are not being sued by dead people who used their products, it is a hell of a business. Operating margins can run above 20% and cash flow is stupendous.
All of that makes Altria’s (MO) decision to delay its buyout of UST (UST) more troubling. The credit markets have been mauled to the extent that the banks helping finance the deal have suggested it be delayed until early next year. The MO press release on the acquisition said "While Altria currently has fully committed financing to complete the transaction, Altria’s lenders advised that it would be preferable to close the transaction in 2009."
Big Tobacco Goes On The Offensive (MO)
Philip Morris USA, part of Altria Group Inc. (NYSE: MO), has filed a rather interesting lawsuit which could act to set the precedent for case law for years ahead. Big Tobacco asked a federal court to overturn a San Francisco ordinance which would effectively ban the sale of tobacco products in convenience drug stores.
Altria & UST Could Face Antitrust Issues (MO, UST)
The merger chatter this morning has Altria Group Inc. (NYSE: MO) looking at UST Inc. (NYSE: UST) in a deal valued at $10 Billion or higher. This could be a major score for Big Tobacco. The Us cigarette leader could grab hold of the largest smokeless tobacco company. Marlboro could add Skoal, Husky, Copenhagen, and other brands to its smokeless tobacco operations to become the leader in that sector as well. But that may also bring up antitrust issues and potential regulatory hurdles.
Is Altria Up In Smoke? (MO)
Altria Group Inc. (MO) spooked shareholders today when it said cigarette shipments this year may plunge as much as 3.5 percent. The stock fell to a three-month low as investors wondered whether the Marlboro maker’s days as a growth company are behind it.
The company reported quarterly results that beat Wall Street expectations by a penny and affirmed guidance. It should not be regulated to the ash heap just yet. As Bloomberg News notes, "Chief Executive Officer Michael Szymanczyk trimmed discounts and raised prices to counter costs from the spinoff of its international division."
Philip Morris International Files To Tap The Liquidity Well (PM, MO)
Philip Morris International Inc. (NYSE: PM) has just filed a shelf registration that would allow the international tobacco giant to sell debt securities and warrants to purchase debt securities.
As this will be the first such shelf filing since Altria (NYSE: MO) spun this off, there is no dollar amount tied to it nor are any underwriters assigned.
The company has described this as follows:
- "The debt securities covered by this prospectus will be our direct unsecured obligations. The debt securities will be issued in one or more series under an indenture dated as of April 25, 2008 between us and HSBC Bank USA, National Association, as trustee."
Investors should just treat this as an open shelf registration for the time being, but this is probably no surprise to anyone who has been following the company and that has looked into its long-term and near-term plans.
You can join our open email distribution list to hear about other special financings, break-ups, IPO’s, secondary offerings, special financings, spin-offs, and other special situations.
Philip Morris shares are trading down by 1.9% today at $50.99 on normal to slightly under normal trading volume. Yesterday and Wednesday closes at $52.00 appear to be the best closing levels since the spin-off, although other days have seen intraday higher levels than yesterday.
Jon C. Ogg
April 25, 2008
Cramer Differentiates Altria & Philip Morris International (MO, PM)
On tonight’s MAD MONEY on CNBC, Jim Cramer discussed Altria Group, Inc. (NYSE: MO) and its soon to be break-up where Philip Morris International (NYSE: PM) will be on its own. It sounded like he was going to pick one over the other, but he likes both of them with Altria as the large cap value stock and a high yield with major buybacks coming, and he likes "PMI" as an international large cap growth stock that will still get to be an S&P 500 Index member.
Cramer said he thinks these combined will go to $100.00. We recently covered the break-up in our Special Situation Investing Newsletter with some of the same reasoning, but with a more conservative target. Our target was more conservative than Cramer’s as we gave this a potential $85.00 target on a combined basis and $78 to $81 on a near-term basis. The difference was that when we gave the target and call the stock market was acting only like a bear market and we hadn’t gotten any bailouts yet.
We’ll revisit our target now that it seems like much has stabilized, although we still tend to be more conservative on targets. We’ve also been covering this one on our open email distribution list as well.
Jon C. Ogg
March 27, 2008
Jon Ogg produces the Special Situation Investing Newsletter and can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
Loews Sends Lorillard to Carolina As New Stock (LTR, CG)
Loews Corporation (NYSE:LTR) has approved a plan to spin off its entire ownership interest in Lorillard, Inc. to holders of its Carolina Group (NYSE: CG) stock and Loews common stock in a tax free transaction. The deal is expected to close in mid-2008. Lorillard, presently a wholly owned subsidiary of Loews, would become a separate publicly traded company on the New York Stock Exchange.
The Lorillard shares distributed in the redemption of the Carolina Group stock would constitute approximately 62% of Lorillard’s outstanding common stock. Loews would effect a redemption of all of the outstanding Carolina Group stock in exchange for shares of common stock of Lorillard, in accordance with the terms of the Carolina Group stock contained in the Restated Certificate of Incorporation of Loews. Holders of Carolina Group stock would receive one share of common stock of Lorillard for each share of Carolina Group stock they own.
Loews would dispose of the remaining 38% of Lorillard’s outstanding common stock in an exchange offer for shares of outstanding Loews common stock if Loews determines that market conditions are acceptable for an exchange. If Loews determines not to effect the exchange offer or the exchange offer is not fully subscribed, the remaining shares of Lorillard would be distributed as a pro rata dividend to the holders of Loews common stock.
Loews currently has two classes of common stock outstanding:
- Carolina Group stock, which is intended to reflect the economic performance of a group of assets and liabilities called the Carolina Group, principally consisting of Lorillard and its subsidiaries; and
- Loews common stock, representing the economic performance of the remaining assets of Loews, including the interest in the Carolina Group not represented by outstanding Carolina Group stock.
Sign up for our own open email distribution list covering buyouts, spin-offs, unusual options activity, special situation previews, merger-arb spreads, and more.
Loews Corp. (LTR) is seeing its shares indicated down almost 6% around $44.00 pre-market, its 52-week trading range is $40.21 to $53.46.
Jon C. Ogg
December 17, 2007
Does Big Tobacco Actually Love Pfizer’s Anti-Smoking ‘Chantix’ Pill? (MO, RAI, PFE)
Pfizer (NYSE:PFE) is seeing additional pressure this afternoon. Apparently the FDA said it is looking into reports that Pfizer has sent out an "early communications notice" to doctors warning them to monitor patients using the popular "stop smoking" pill called Chantix with the note that it might trigger erratic behavior or possibly suicidal thoughts in some users. The FDA has also noted that Chantix users should also be cautious whendriving or operating autos and machinery, as the drug has reportedlycaused some incidents of drowsiness.
If you know an ex-smoker, you’d swear up and down that some of them were suicidal when they tried to quit before this drug ever came out. This may be after that musician in Dallas was shot to death following him having an ‘altercation’ with his girlfriend before he ran out and pounding on a door in the middle of the night, so in all honesty this one might have been seen ahead. Here is the official communication:
- "FDA informed healthcare professionals of reports of suicidal thoughts and aggressive and erratic behavior in patient who have taken Chantix, a smoking cessation product. There are also reports of patients experiencing drowsiness that affected their ability to drive or operate machinery. FDA is currently reviewing these cases, along with other recent reports. A preliminary assessment reveals that many of the cases reflect new-onset of depressed mood, suicidal ideation, and changes in emotion and behavior within days to weeks of initiating Chantix treatment. The role of Chantix in these cases is not clear because smoking cessation, with or without treatment, is associated with nicotine withdrawal symptoms and has also been associated with the exacerbation of underlying psychiatric illness. However, not all patients described in the cases had preexisting psychiatric illness and not all had discontinued smoking."
There is always a silver lining somewhere for someone. If you are Altria (NYSE:MO) or Reynolds American (NYSE:RAI), then you probably just got a little more pep in your step. Imagine a doctor saying, "I’d rather see you keep smoking and die one breath at a time rather than get suicidal." Did that really happen that ANY physician said that? Probably not. But that is how a trader might view this.
Altria (NYSE:MO) is currently under review for the 24/7 Wall St. Special Situation Investing Newsletter.
Jon C. Ogg
November 20, 2007
Altria: The Hidden SABMiller & Molson Coors Winner (MO, TAP, BUD)
If you follow beverage stocks or follow alcohol and beer stocks very much, you certainly saw the huge gains today seen in Canadian ADR’s of Molson Coors (NYSE:TAP). Shares rose some 10% on four-times normal volume after the announcement that SABMiller plc and Molson Coors will combine U.S. brewing operations into a joint venture called MillerCoors. The joint venture will be 58% owned by SABMiller and 42% owned by Molson Coors with each having an equal voting interest in an all out effort to cut costs to better compete against the dominance of Anheuser-Busch (NYSE:BUD) and the solid Budweiser brands.
This joint venture will result in a combined savings of $500 million annually which will be from reduced shipping distances, economies of scale, production and capacity utilization, and operational and advertising overlaps. The companies are projecting $6.6 Billion in combined U.S. sales. Anheuser-Busch shares are down 1% on the day as its total sales in 2006 for domestic and international (plus equity partner sales) were $15.717 Billion in net sales.
Interestingly enough, Altria Group, Inc. (NYSE:MO) may be the hidden winner in this venture because it owns approximately 28.6% of SABMiller plc. Altria is also the one that will hold the SABMiller interest after the previously announced pending spin-off of Philip Morris International occurs in 2008 (assuming it does).
Altria: The Day the Tobacco Plant Closed (MO)
Altria Group, Inc. (MO-NYSE) has announced a streamlining of operations to cut costs in a move that will result in a North Carolina manufacturing plant being closed by 2010. The Cabarrus, North Carolina plant that employs 2,500 workers will be closed and manufacturing will be consolidated at its Richmond, Virginia plant. Much of the production for Philip Morris International will further be moved to Europe, eliminating much of the shipping/freight costs.
The company expects savings to start in 2008, and total cost savings by 2011 are expected to be in the $335 million per year. Of the savings, $179 million will go to Philip Morris International and $156 million will go to Philip Morris USA. It sees charges of $325 million, or $0.10 off of EPS. The charges will be mostly taken in Q2 and about $50 million will come later in 2007.
It sounds like if you are a real estate agent around Cabarrus, North Carolina that you will probably have a lot more housing supply to sell.
Jon C. Ogg
June 26, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
Cramer Sticks With Tobacco & Sin Stocks (MO, RAI, VGR, UST, BUD)
Stock Tickers: MO, RAI, VGR, UST, BUD
On tonight’s MAD MONEY on CNBC, Jim Cramer came out very positive on Vector Group Ltd. (VGR-NYSE). He noted that Carl Icahn is a big backer of the company and noted hat it has a monster yield and has hiked its dividends almost yearly. In call-ins he also noted Altria (MO-NYSE) and Reynolds (RAI-NYSE) in regular tobacco, and even UST (UST-NYSE) in smokeless tobacco all as undervalued stocks. As far as another sin name, he also noted Anheuser Busch (BUD-NYSE) positively in a call-in during the segment.
Jon C. Ogg
June 20, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in any of the companies he covers.
Tobacco Stock Strength
From Ticker Sense
MO and UST top our list of stocks that have been up the most consecutive days. Interestingly, MO has been up 6 days in a row 7 times in the last 4 years, and each time the stock has gone up on the 7th day as well.
Tobacco M&A: Where Is Phillip Morris (MO)
The company’s slogan used to be "Call for Phillip Morris". Well, tobacco mergers and acquisitions are heating up and the world’s largest company is silent.
Imperial Tobacco (ITY) has already bought US cigarette company Commonwealth Brands, and is now making a $15 billion plus run at Spanish smokes company Altadis. Earlier this year, Japan Tobacco made a bid for cigarette company Gallaher Group (GLH).
Now that Phillip Morris parent Altria (MO) is spinning off its Kraft (KFT) food business, it would seem that it would want to enhance its presence in the global tobacco industry. It is already the largest tobacco company in the world, and its international business is much larger than its revenue in the US.
And Altria has the market cap to buy virtually any rival. British Tobacco’s market cap is $29 billion. Altria’s is $178 billion.
Wall St. should not be surprised if Altria does become aggressive in the tobacco M&A market. It may allow some consolidation among smaller companies. But, if investors open the morning paper some day and see that MO has made a bid for Imperial Tobacco, no one should be surprised.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
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