This Company’s Products Kill People, But It Has A 6.2% Yield
Altria's cigarettes kill hundreds of thousands of Americans every year, yet its stock is quietly outperforming the S&P 500 by a wide margin in 2024. The question investors now face says as much about ethics as it does about returns.
Most of Altria’s (NYSE: MO | MO Price Prediction) revenue comes from cigarettes. It owns the world’s most visible cigarette brand. That is, Marlboro, which is a huge part of its revenue. Altria’s image problem is simple. According to the CDC, “Smoking and secondhand smoke exposure cause over 480,000 deaths in the U.S. each year.” The WHO says the figure is 7 million worldwide. This does not include the people whose health is severely damaged by cigarettes.
Altria has an attraction few stocks do. It has a 6.2% dividend and has raised its dividend 61 times over the last 57 years. It has also bought back shares worth tens of billions of dollars over the same period. Its rock-solid balance means that trend will almost certainly continue.
And yield stocks usually have mediocre stock performance. Altria shares are up 27% year to date while the S&P 500’s increase is less than 13%. As the tech sell-off continues, Altria’s stock price advance could accelerate, as investors look for a safe harbor
Altria is not alone among S&P 500 stocks with a yield over 6%. UPS (NYSE: UPS) is on the list. So are General Mills (NYSE: GIS) and Pfizer (NYSE: PFE). People who are squeamish about a tobacco stock have other places to go.
Altria’s finances are mundane but steady. In the most recent quarter, revenue was flat at $6.1 billion. EPS dropped 3% to $1.37. The company also narrowed its guidance for the balance of the year, and it did so at the top of the previously disclosed range.
Altria has also weathered a sharp drop-off in smoking in America. In 1995, 25% of adults smoked. Last year the figure was 10%. The pace of the decline has slowed.
Investors will face a trade-off if the AI stocks sell-off continues. Will they buy the stock of a company with products that kill people?
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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.
