To earn an annual dividend of $500 from Altria Group shares, find out the required quantity.
Diving into the world of dividend investments can be quite rewarding, offering a steady stream of income from your investments, as long as you zero in on trustworthy dividend-paying companies. Enter Altria Group (MO - 0.61%), a firm that's dedicated to returning cash to its shareholders. Their self-proclaimed goal is to consistently boost dividends, aiming for a mid-single-digit percentage annual upswing.
Let's do some simple math to figure out how many shares you could own for the purpose of earning $500 in annual dividends.
Quantifying your shares
Altria Group initiated a $1.02 quarterly dividend per share in October, a minor hike from the previous $0.98. This translates to $4.08 in yearly dividends for every share of Altria stock.
To amass $500 in annual dividends, you'd divide $500 by $4.08. The answer? A little over 123 shares, assuming the dividend rate remains unchanged. However, should Altria Group continue ramping up payments, you could reap more than $500 annually. To own those 123 shares, you'll need more than $6,400, based on the closing stock price on December 31, 2024.
Altria's extraordinary dividend yield
Altria's investors can rejoice in a whopping 7.8% dividend yield - an eye-catching figure that's more than six times higher than the S&P 500's yield of 1.3%. The index serves as a benchmark for large-cap stocks similar to Altria.
So, is the dividend sustainable?
Long story short: Altria's tobacco business remains a veritable 'Challenge Island'. The company's smokeable-product volumes dropped by an alarming 10% through the first nine months of 2024 to reach 53.3 million, pushed by the rise of illicit goods and squeezed consumer budgets.
In the bustling market of Marlboro, Altria's oh-so-popular product, the company's market share dropped to 41.7% at the end of Quarter 3, compared to 42.3% in the preceding year.
Altria still generates sufficient Free Cash Flow (FCF) to maintain its dividends, however. Its year-to-date FCF fluttered around $5.3 billion, comfortably covering the $5.1 billion in dividends.
During the third quarter, Altria's diluted earnings per share under GAAP gorgeously increased by 9.8%. Regrettably, the company's revenue fail to impress, inching up by a meager 1.3%. Although Altria's dividend appears steadfast, plunging into the company's core smokeable-product business leaves little room for optimism.
Sources:[1] Yahoo Finance[2] Altria Investor Relations[4] Altria Quarterly Report[5] Seeking Alpha
- To earn $500 in annual dividends from Altria Group, you would need to own approximately 123 shares, given their current quarterly dividend of $1.02 and an assumption of unchanged dividend rate.
- If you wish to own those 123 shares, you would need more than $6,400, based on the closing stock price on December 31, 2024.
- Despite a 10% decrease in smokeable-product volumes and a drop in Marlboro's market share, Altria Group has sufficient Free Cash Flow to maintain its dividends, with year-to-date FCF of $5.3 billion covering the $5.1 billion in dividends.
- Considering the challenging circumstances of Altria's tobacco business, some investors might explore alternative ways to diversify their investments, such as utilizing a creditline or investing in other dividend-paying companies, while still adhering to their investing principles.
