Altria (MO) Rewards Shareholders With 8% Hike In Dividend

Altria Group, Inc.’s (NYSE:MO) board of directors recently announced an 8% hike in its quarterly dividend to 61 cents per share. The new dividend will be paid on Oct 11 to shareholders on record as of Sep 15, 2016. The annualized dividend now amounts to $2.44 per share with a dividend yield of 3.7%, based on Altria’s closing price of $66.33 as of Aug 19, 2016. Last year, the company increased its dividend by 8.7%.

The cigarette maker regularly returns value to shareholders and since the spin-off of Philip Morris International Inc. (NYSE:PM) , in 2008, has increased dividend every year. Notably, the company has raised its dividend 50 times in 47 years. Also, the company has a dividend payout ratio target of around 80% of adjusted earnings per share.

Altria is not the only tobacco company that engages in shareholder friendly moves as many of its peers to have been rewarding investors with attractive yields. While Altria and peer Reynolds American, Inc. (NYSE:RAI) pay dividends that yield more than 3.6%, Philip Morris has a dividend yield of 4.07%. Vector Group Limited (NYSE:VGR) , a smaller American cigarette company that owns the Pyramid and Eagle 20's brands, has a striking dividend yield of 7.25%.

ALTRIA GROUP Price and EPS Surprise

ALTRIA GROUP Price and EPS Surprise | ALTRIA GROUP Quote

Apart from dividend payouts, Altria regularly repurchases shares. During the second quarter 2016, Altria repurchased 2.7 million shares for a total of $173 million.

The recent dividend hike and enhanced buyback program reflect the company’s strong cash position and a solid balance sheet.

Moreover, the company has been posting decent results for quite some time now on the back of steady sales growth and positive pricing, which in turn, are supported by outperformance of the core tobacco business and leading premium brands.

In addition, Altria Group, like its peer Reynolds American, is diversifying the product portfolio due to volume declines across the cigarette industry. These companies are now focusing primarily on smokeless products and e-cigarettes.

Altria has a Zacks Rank #3 (Hold).