This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
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At the request of a reader, I am having a look at Altria this week. However, I fear it is a bit early to do so considering the fact that the company is in the process of spinning off Philip Morris. In addition, last year at this time the company spun off its Kraft Foods holdings. This will mean that Altria will be a much different company after these spin-offs are complete. Altria will still have related holdings, but it will operate in a much different fashion. I would like to re-look at this analysis in a years time to see how things unfold. So, this analysis is a bit skewed by these spin-offs so please be cautious.
The Company: Altria Group, Inc. (MO-NYSE)
Altria Group, Inc. is the parent company of Philip Morris International, Philip Morris USA, John Middleton, Inc. and Philip Morris Capital Corporation. Altria Group owns 100% of the outstanding stock of Philip Morris International, Philip Morris USA, John Middleton, Inc. and Philip Morris Capital Corporation. Philip Morris International is a leading international tobacco company with seven of the top 20 global cigarette brands. Philip Morris USA is the largest tobacco company in the United States, with approximately half of the U.S. cigarette market. John Middleton, Inc. is a leading manufacturer of machine-made large cigars. Philip Morris Capital Corporation maintains a portfolio of leverages and direct finance leases. In addition, Altria Group has a 28.6% economic and voting interest in SABMiller, plc., the world’s second-largest brewer.
| No | |
| No |
THE FUNDAMENTALS
Revenue
Click to EnlargeRevenue Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My Revenue Score | 0.0 |
Earnings Per Share
Click to EnlargeEarnings Per Share Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My EPS Score | 0.0 |
TOTAL FUNDAMENTALS SCORE: 0.0
THE RATIOS
Return on Equity
Click to EnlargeReturn on Equity Scoring
| Criteria | Scoring |
| Above 15% for Last 5 Years | 1.0 |
| At Least One Year Below 15% in Last 5 Years | 0.0 |
| My ROE Score | 1.0 |
Other Ratios
| Ratio | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Debt to Equity | Less Than 0.50 | 0.60 | 0.0 |
| Payout Ratio | Less Than 60% | 68% | 0.0 |
| Credit Rating | BBB+ | BBB+ | 1.0 |
| Total Ratio Score | 1.0 |
TOTAL RATIOS SCORE: 2.0
DIVIDEND DATA
Annual Dividends
Click to EnlargeDividend Scoring
| Criteria | Scoring |
| 25+ Years of Dividend Growth | 1.0 |
| 10+ Years of Dividend Growth | 1.0 |
| Less Than 10 Years of Dividend Growth | 0.0 |
| My Dividend Growth Score | 0.0 |
TOTAL DIVIDEND GROWTH SCORE: 0.0
STOCK VALUATION
| Valuation Metric | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Dividend Yield | Cur Yld Greater Than 10 Yr Avg Yld | 4.3% | 0.0 |
| Div Yld Compared to SPY Div Yld | Cur Yld Greater Than SPY Yld | 2.4% | 1.0 |
| P/E Ratio | Cur P/E Less Than 10 Yr Avg P/E | 12.3 | 0.0 |
| Relative P/E | Relative P/E Less Than 1.0 | 1.24 | 0.0 |
| Price to Sales | Less Than 1.5 | 3.89 | 0.0 |
| Total Ratio Score | 1.0 |
Canadian Shareowner’s Association Stock Selection Guide Software Buy Price
| Buy Zone |
Maybe Zone |
Sell Zone |
Current Price | Rating | Scoring (Buy=1.0, Other=0.0) |
| 0.0 |
TOTAL STOCK VALUATION SCORE: 1.0
SUMMARY
Points Earned:
3 out of 14 – half points are rounded down to be conservative
The stock is rated LOW with 3 points earned through my analysis of the stock. Again, this company is going through a transition. The dividend growth has stopped, because of the spin-offs. Traditionally this company has been bought for its strong dividend and strong dividend growth. It is way too early to tell what the future holds for Altria. At this time, I am not a buyer of Altria and I am going to wait to see what happens over the next year before I relook at it.
| Rating | Points Required |
| High | 11+ points |
| Medium | 8-10 points |
| Low | < 8 points |
Reminder: This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
The Dividend Guy does not own shares in MO
Check the S+P over the last few years. Of the top 13 S+P analysts 12 said “buy” with 1 saying “neutral”. I totally disagree with your analysis.
If 12/13 analysts say buy, then that’s a heavy sell sign in my books.
Hi John M – thanks for the comment. I am very skeptical about analyst recommendations and do not hold much stock in them. My worry is that too many investors look at these ratings and make their decisions based on them.
I totally respect your disagreement with my analysis, but I would like to understand why YOU disagree. Is it just because of these analyst ratings, or is it because of something I missed or looked at differently than you did in your analysis.
This is the cool and fun thing, and sometime frustrating, thing about investing. One person thinks it is a buy and another thinks it is a sell. Who is right? It all depends on your frame of reference and assumptions made in that analysis.
Paul J – thanks for the comment as well!
I too would wait and see how things develop, but, I think it was brilliant to spin off the int’l unit so that it is no longer exposed to the political blackmail and payments to the gov’t that no other industry has ever been exposed to. The domestic unit has the top cigarette maker and the top machine made cigar maker. As part of a family with over a century in the tobacco industry, my next move would be to move the entire operation offshore and tell Uncle Sam to go to hell concerning payments. People who smoke choose to, they aren’t allowed to advertise, they aren’t allowed to do much of anything. My question is, when will our fascist gov’t, no matter which party is in charge, going to go after the booze industry, the auto industry, or what’s left of it since people die in car wrecks, especially when drunk, and any other industry that makes a product that might be harmful and I emphasize might. No doubt tobacco use can be harmful but the second hand smoke issue was a lie by the EPA and I didn’t see any corrections on page one and frankly, to end my rambling, we are seeing why America’s economic might has eroded if not totally disappeared. Sadly, our greatest days are behind us. I have to laugh when I think that Florida, where we were to have a major convention a few yrs. back, passed a law banning smoking indoors so we couldn’t give out samples, etc. at the Convention Center in Orlando, but, with 3 weeks to go, we moved the entire convention to the Opryland hotel and Florida lost quite a bit of revenue, but then, who cares what 30,000 people, small businessmen and women who employ hundreds of thousands of good paying jobs, think or feel. Besides, why don’t they kill off the rest of the cigar business in Florida, Calle Ocho in Miami and Tampa and Jacksonville. It’s Econ 101, how to lose your economy.
And people wonder why industries are leaving the US and we now are on the precipice of going not into a recession but a depression that will make ’29 look like a party. Conservative analysis though, I’m still glad I own the shares at $20, the div’d is great and I’ve already reduced my cost basis to 0 and besides, the Int’l division will kick butt, nice pun, and the currency translation will only increase the value as the dollar continues to collapse which will accelerate as it falls under .70 vs. the Euro and other currencies. We’ve committed economic suicide as a nation and without borders, we’ve committed national suicide. NAFTA is basically there to allow Mexico and Canada to trade with each other as we MAKE NOTHING anymore except the Hollywood sequels since they’ve become bankrupt in ideas also. Silicon Valley has moved to India and Israel, mfrg to China and others, and all we are is a consumer nation buried under our own debt. We won’t see stagflation, we’ll see hyperinflation.
It does not look as though you corrected for the fact that until one year ago, earnings per share and dividends included the earnings and dividends of kraft. If you look p/e, p/e/g, and yield, the results might look different.
Anyone owning Phiiip Morris for the long term investment and yield has been handsomely rewarded, the first 100 shares I bought at $8 in ’68 paid for my college undergrad degree with some left over……..the only mistake I made was going to college and selling the shares or they’d be worth in excess of $3mm today…..that yield can only be met by firms like WMT bought in ’73 and a couple re-entry points after that…..they’ve always done well, especially in down markets and if they didn’t have to pay blackmail money to the gov’t, which really are just taxes passed on to those least able to afford them, their profits would be even higher…..it’s a well managed company and like most, are moving operations offshore, at least they offered ALL their employees at the NC plant they closed a job at the Richmond facility…..I still remember the good days when they started construction at 120 Park and were HQ’d at 100 Park…..ahhh the good old days of capitalism……soon to be gone and forgotten in this borderless country where if you can’t pay your mortgage, don’t worry, the taxpayers will…….
Please read a March 13, 2008 article by Todd Sullivan @ Seeking Alpha. I believe his analysis says it all and owning MO before the split (03/38/08) would be a wise decision.
I have read academic research somewhere that spin-offs perform pretty good relative to the markets over 5-10 year periods. Remember AT&T in the 1980’s?
I think that buying MO now would be a nice thing to do.
Oh yeah and MO is the best performing S&P 500 stock from 1957-2007 ( source Jeremy Siegel)