Own This Cigarette Stock Or Treasuries?
With the stock market leaning hard on one shaky pillar and U.S. debt crossing $40 trillion, a 57-year-old dividend stalwart from an industry everyone loves to hate might be the safest place to park your money right now.
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The 5-year U.S. Treasury yield stands at 5.04%. Arguably, U.S. sovereign debt is the safest investment in the world. A bit of doubt has crept in as U.S. debt topped $40 trillion. However, it remains a “sure thing” from an investment safety standpoint.
As an alternative to the five-year U.S. paper, an investor could own stock in the tobacco company Altria (NYSE: MO | MO Price Prediction). It has a 6.5% yield. It has raised its dividend 61 times in the last 57 years. Its stock is up 5% in the last year. The U.S. may go out of business before Altria does. People will keep smoking for close to forever. Altria has a rock-solid balance sheet and unspectacular but solid revenue year after year.
In the most recent quarter, revenue was flat at $6.1 billion. EPS was down 3% to $1.37.
Altria’s revenue has one primary driver: Marlboro, the world’s most famous cigarette brand. It has some other cigarette revenue and a very modest contribution from smokeless tobacco. You shouldn’t count either of those as meaningful for sales.
Altria is a lesson in investing, particularly for those who want yield. Several companies are over a century old and pay dividends around 6%. And those payments are not going anywhere. This list includes General Mills (NYSE: GIS), Kraft Heinz (NYSE: KHC), and Pfizer (NYSE: PFE). Will their prices rise and fall? Certainly, but none is likely to swing wildly.
More than a whisper suggests that a stock market that relies this much on one factor faces trouble. AI has driven the market up. Concerns that adoption won’t keep soaring and that AI data centers will get expensive could drag it down. Is it a dot-com bubble? Probably not, but the market could certainly reset down 20% to 30%. A recovery could take years if another driver doesn’t replace AI.
When is it time to buy a safe dividend stock? About the same time as buying a 5-year U.S. Treasury. Given demand for its 5% yield, the evidence suggests now is that time.
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
