Altria Group, Inc. (MO - Get Rating) has firmly established itself as a dominant force in the market, largely due to its diverse portfolio of smokeable and oral tobacco products. These products are leading the charge against traditional smoking, positioning MO as a key player in the evolving industry.

In its third-quarter earnings report, MO delivered impressive financial results that exceeded analyst expectations. The company’s long history of consistent dividend payments is another testament to its commitment to returning value to investors.

Dividend-paying stocks, like MO, offer investors a reliable and growing income stream, making them ideal for those seeking passive income. Moreover, MO’s strong performance is reflected in its stock price. Over the past six months, the stock surged by 21.1%, and in the last year, it has gained 29.7%, closing the last trading session at $54.13.

The company’s continued commitment to innovation, its ability to adapt to market trends, and the growth of its product portfolio are all likely to shape its future trajectory.

So, let us dive into the factors that could shape MO’s performance in the near future.

Recent Developments

On June 26, MO announced the submission of Premarket Tobacco Product Applications (PMTAs) to the U.S. Food and Drug Administration (FDA) for its innovative on! PLUS oral nicotine pouch products. The submission underscores MO’s commitment to addressing consumers’ evolving preferences.

On June 21, MO announced that the U.S. Food and Drug Administration (FDA) had authorized several new products, including the NJOY ACE Pod Menthol 2.4%, NJOY ACE Pod Menthol 5%, NJOY DAILY Menthol 4.5%, and NJOY DAILY Extra Menthol 6%. These FDA approvals significantly enhance MO’s smoke-free product portfolio.

As consumer demand for safer alternatives rises, these offerings would give MO a competitive edge, driving both immediate sales and sustained profitability while supporting broader public health goals.

Sound Historical Growth

Over the past five years, MO has demonstrated consistent growth across key financial metrics. Its EBITDA and operational income (EBIT) both expanded at a CAGR of 2.5%. Moreover, net income surged at a CAGR of 42.3%, while EPS climbed even higher at 44.7%, showcasing robust profitability.

Robust Financials

For the fiscal third quarter that ended September 30, 2024, MO’s net revenues came in at $6.26 billion. Its gross profit increased 2.9% year-over-year to $3.81 billion. In addition, the company’s operating income grew 2% from the year-ago value to $3.15 billion.

Furthermore, MO’s net earnings and EPS adjusted for special items rose 5.9% and 7.8% from the prior year’s quarter to $2.29 billion and $1.38, respectively.

Impressive Dividend History

On December 11, MO announced a regular quarterly dividend of $1.02 per share, payable on January 10, 2025 to shareholders of record as of December 26, 2024. The announcement highlights MO’s ongoing commitment to delivering value to its investors through consistent and reliable dividends.

MO has increased its dividends for 54 consecutive years. Moreover, with an annual dividend of $4.08 per share, the stock currently offers a robust 7.46% yield, reflecting its ability to generate solid returns for income-focused investors.

Also, the stock’s dividend payouts have increased at a CAGR of 4.4% over the past three years, while its four-year average dividend yield is 7.97%.

Favorable Analyst Estimates

Analysts expect MO’s revenue for the fiscal fourth quarter ending December 2024 to marginally increase year-over-year to $5.04 billion. In addition, the company’s EPS is expected to rise 9% from the prior year’s quarter to $1.29.

Looking at the full fiscal year ending December 2024, MO’s revenue is projected to come in at $20.37 billion, meanwhile its EPS is forecasted to grow 3.7% from the previous year, reaching $5.13.

High Profitability

MO’s trailing-12-month gross profit margin of 69.76% is 92.8% higher than the industry average of 36.18%. Its trailing-12-month EBITDA margin stands at 59.99%, 358.8% higher than the industry average of 13.08%.

In addition, the company boasts a trailing-12-month net income margin of 50.51%, which is significantly above the sector average of 4.29%. Also, the stock’s trailing-12-month levered FCF margin of 21.24% outperforms the industry average of 5.61% by 278.6%.

POWR Ratings Reflects Optimism

MO’s stable fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

MO earns an A grade for Quality, supported by profitability measures that exceed industry benchmarks. Furthermore, the company has a B grade for Stability, reflecting its 24-month beta of 0.16.

Within the B-rated Tobacco industry, MO is ranked #2 out of 9 stocks. Beyond what is stated above, we have also given MO grades for Momentum, Growth, Value, and Sentiment. Get all MO ratings here.

Bottom Line

MO has established itself as a titan in the Tobacco industry through its consistent growth and track record of dividend payments, making it a perfect opportunity for investors looking for passive income. Coupled with its portfolio of innovative smoke-free products, the company is set to soar even higher.

Considering MO’s high profitability, strong financials and low volatility now might be the ideal time to consider adding MO to one’s investment portfolio.

How Does Altria Group, Inc. (MO) Stack Up Against Its Peers?

Although MO’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who exhibit even stronger POWR Ratings. So, consider these A (Strong Buy) and B (Buy) rated stocks from the Tobacco industry:

Philip Morris International Inc. (PM - Get Rating)

Imperial Brands PLC (IMBBY - Get Rating)

Turning Point Brands, Inc. (TPB - Get Rating)

To explore more A or B-rated Tobacco stocks, click here.

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MO shares rose $0.09 (+0.17%) in premarket trading Wednesday. Year-to-date, MO has gained 42.93%, versus a 28.33% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

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