|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
Will Altria be a Treat or a Habit You Can't Get Rid Of?
Posted by: Muhammad Bazil (IP Logged)
Date: October 12, 2013 04:09PM
Altria Group Inc (MO) is a producer of cigarettes and other tobacco related products. Two of its competitors include; British American Tobacco (ADR) (BTI) and Imperial Tobacco Group Plc (ADR) (ITYBY)
Altria Group has been paying out dividends of 5.5% in recent years. This is reportedly above average compared to the rest of the industry. However, as this will be one of the things that attracts new investors and keeps hold of current investors, it may deter investors away from other companies like British American Tobacco Plc and Imperial Tobacco Group Plc.
Altria is reportedly benefiting from the recent US government shutdown as civil servants will have more time to smoke than they previously had along with having more of a reason to smoke. Whilst this may sound a bit ludicrous and weird, it might genuinely be true. And if it is true, it is certainly something that is beneficial for its shareholders. However, I personally wouldn't put too much hope that this is entirely true or a good enough reason on its own to buy this stock.
Both Fisher Asset Management and Gardner Russo & Gardner hold a large amount of British American Tobacco Plc stock, $352.6 million and $241.2 million respectively which equates to around 0.9% and 2.8% of the funds it's held in. This may be a plus for British American Tobacco if other asset funds are more inclined to invest in it but it is unlikely that asset fund won't investor in Altria Group Inc and Imperial Tobacco Group Plc.
British American Tobacco has recently had their rating upgraded by Bank of America from a 'neutral' to a 'buy'. Altria Group Inc has also been given a BUY rating from analysts at TheStreet. This could be a benefit for both British American Tobacco Plc and Altria Group Inc if it attracts investors to these stocks but investors shouldn't entirely judge a stock by broker ratings so this change in view will only have minimal impact.
British American Tobacco has also announced an interim dividend of £0.45 or 45p a share. This is an increase of 7%. Altria Group has recently paid a dividend of $0.48 per share (lower than British American Tobacco Plc). Imperial Tobacco Group hasn't paid a dividend recently, putting them at a slight disadvantage.
Imperial Tobacco Group Plc have recently appointed a new finance director, Oliver Tant. Oliver in, according to this report, one of the most experienced accountants in the UK, previously working with Deloitte, Hertz Europe and Colgate. Whilst this is also a benefit for Imperial Tobacco Group Plc, it's going to have a minimal impact on the other two stocks.
Altria Group Inc made $24.6bn in sales for 2012, of which 38.84% was Gross profit and 16.979% Net profit. For every £1 of assets they own, they have $0.90.93 of debt. I would like to highlight that if deferred tax and other, minor, liabilities were removed from this, the figure would be $0.86.099. Also, current (short term) liabilities are equal to 27% of total liabilities (not counting the tax and 'other' liabilities) which means most of this debt is long term.
British American Tobacco Plc made sales of $45.8bn of which 11.798% was Gross profit and 8.98% Net profit, in 2012. For every $1 of assets they own, they have $0.71.533 of debt.
Imperial Tobacco Group Plc made $28.5bn worth of sales in 2012 with a Gross profit margin of 19.227% and a Net profit margin of 5.312%. For every $1 of assets they own, they have $0.77.987 of debt.
I would rate Altria Group Inc as a BUY on the pure basis that, whilst the news section isn't overly in favour of Altria Group Inc, it isn't overly against them either. Their financials are a lot better than both British American Tobacco Plc and Imperial Tobacco Group Plc. Altria Group Plc are also a fairly decent sized company but not quite as big as British American Tobacco Plc which means that Altria Group Plc have room to grow both in the tobacco market and financially. They are paying a dividend which is always a benefit.
If, however, Altria Group Inc is a bit too much of a risk, or rather if you're looking for more security, I would also rate British American Tobacco Plc as BUY as it's got fairly decent profit margins, that have potential for efficiency, a average level of debt and have the financial backing from asset managers. They are also paying a higher dividend than Altria Group Inc.
Stocks Discussed: MO, TYBY, BTI,