Altria (MO): Income and value
In his specialty income-oriented service, High Income Alert, he adds, "And we stand to collect a lot of income in the meantime." Here's his review of the tobacco company.
"Altria is the parent company of Philip Morris, U.S. Smokeless Tobacco, John Middleton, Ste. Michelle Wine Estates and Philip Morris Capital.
"Its primary moneymaker is tobacco, including such well-known brands as Marlboro, Copenhagen, Skoal and Black & Mild.
"Why buy Altria now? Tobacco is largely recession-proof. Sales are still booming, especially in the world’s emerging markets.
"The company has plenty of cash and ample cash flow, so it is hardly affected by the credit crunch. (It’s currently sitting on $16 billion.)
"A strong dollar, of course, is not a positive for Altria because the company generates so much revenue overseas.
"But the government’s massive stimulus plan will ultimately prove inflationary. That will undermine the dollar, driving Altria’s profits higher.
"And then there is that dividend: 7.6%. Will it be maintained? I believe so. Revenue is still growing at a 3.5% annual rate. And Altria enjoys operating margins of 32%.
"Also, it's important to note that Congress is considering a bill that would regulate tobacco and make it difficult for new tobacco companies to enter the market.
"In short, it will lock in Altria's dominant position in the market. The bill was co-sponsored by Barrack Obama when he was a senator, so it may well pass."
The Stock Advisors