Altria: Safe haven for income


by Amy Calistri, editor The Daily Paycheck

Companies built on the vices and habits of consumers -- such as Altria Group (MO) -- tend to hold up better in a bad economy. The company has managed its highly regulated and stagnant market well -- especially for income investors.

Altria has raised its quarterly dividend 45 times in the last 42 years. The last increase was in August 2011, when the company bumped its quarterly distribution up 7.9% to $0.41 per share.

At current prices, MO's yield is 5.0%. Altria distributes more of its income to shareholders than most companies, targeting its dividend payout ratio at approximately 80% of its adjusted diluted earnings per share.

Most of Altria's growth has been on the bottom line. It has instituted tough cost controls, which are expected to deliver $400 million in annualized savings by the end of 2013. And Altria has had to raise prices to offset waning demand for its products.

Still, the company was able to grow its earnings per share by 6.7% in the quarter ended March 31 over the same quarter last year.

Action to Take --> Altria's defensive business and strong dividend track record have made it a popular safe haven in uncertain market conditions.

If you're looking for huge price appreciation, MO isn't the right fit for you. But if you're looking for price stability and a growing income stream, you should consider Altria.