Saturday, November 24, 2012

Historical Dividends for Altria (1979-2012)

Altria (ticker symbol: MO) is one of the most well-known corporations in the world.  Altria owns Phillip Morris USA, which sells Marlboro, the most popular cigarette brand in the world in terms of sales.  Altria controls about 50% of the cigarette market in the United States and sells various cigarette brands such as Parliament, Virginia Slims, and Basic brands in addition to the Marlboro brand.

Altria was formerly known as Phillip Morris Companies, Inc. prior to a re-branding that occurred in 2003.  Altria has engaged in two corporate spin-offs in recent years.  In 2007 Kraft Foods (ticker symbol: KRFT) was spun off from Altria and in 2008 Phillip Morris International (ticker symbol: PM)was spun off. 

Altria is a favorite equity holding among investors seeking dividend income.  As of the market close on November 23, 2012, Altria's dividend yield was about 5.26% and the company has historically maintained one of the largest dividend yields among equities in the Standard & Poor's 500 Index.  According to Altria's website, the company's target dividend payout ratio is approximately 80 percent of adjusted earnings per share.  After accounting for stock splits and the spin-offs of Kraft Foods and Phillip Morris International, Altria has increased its dividend payout per share every year since at least 1970.

The cigarette industry is a mature one that has loyal (or addicted) costumers.  State and local governments have raised taxes on cigarettes on a seemingly annual basis, yet the sales of cigarettes and other tobacco products continue to increase annual given the relatively inelastic demand for such tobacco products.

As a result of the maturity of the market, the relatively inelastic demand, and the large target dividend payout ratio of 80% of adjusted earnings per share, Altria has provided an unbelievable total return to stock holders over the years, making many long-term holders multimillionaires.  Between January 1970 and November 2012, Altria's total return (accounting for reinvestment of dividends and the spin-offs of Kraft Foods and Phillip Morris International) was approximately 216,200%, and annualized gain of about 20% per year!  A $10,000 investment in 1970 in Altria would have grown to approximately $21,620,000 by November 2012, an astonishing return over that time period.

Not surprisingly, the growth in Altria's annual dividend payouts has also been incredibly impressive.  The chart below shows the annual dividends for Altria paid between 1979 and the estimate 2012 full year distribution.*  As shown, after accounting for share splits and the spin offs of Kraft Foods and Phillip Morris International, Altria paid a dividend of approximately $0.0521/share in 1979 and the dividend has increased to an estimate $1.70 in 2012.  The annual dividend has therefore increased 10,421% during this time period.  The annual dividend dividend has increased at an annualized rate of over 15% per year since 1979.

The chart shown below (click on the chart for a larger view) also lists increases in the dividend payout over various 5- and 10-year periods of time.  As shown, the 5-year annualized dividend increase has ranged between a low of about 8.03% (for the period ending in 2007) and a high of about 25.36% (for the period ending in 1990).   The 10-year annualized dividend increase has ranged between a low of about 8.42% (for the period ending in 2007) and a high of about 23.12% (for the period ending in 1989).

Altria has been a staple of investors hungry for large and reliable ever-increasing dividend payouts and should continue to be so for years to come.  There have been fears that fewer people would taking up smoking given the effort to educate young people about the dangers of tobacco use and the always-looming treat of lawsuits.  However, Altria has nevertheless continued to provide strong returns in recent years.  Anyone looking for dividend income should consider Altria as well as Phillip Morris International, which may have a brighter future given the projected steady increase in the number of smokers overseas.

* Without Kraft Foods included in its results, Altria would have paid a dividend of  $2.88 in 2007.
** Without Phillip Morris International included in its results, Altria would have paid a dividend of $1.22 in 2008., 
*** This chart starts with data from the calendar year 1979 because I was unable to locate reliable annual dividend payouts for the years prior to 1979.