Stock prices may move up and down, but the fundamentals of such companies remain robust. This is the characteristic of a recession-resistant business. In summary, MO returned more to shareholders in 2022 through share repurchases and dividends. In Q3, the company also reported having retired $1.1 billion in outstanding debt. According to the Q3 conference call, MO had $375 million remaining (out of $3.5 billion) towards share repurchases, and management communicated that they planned to complete it by the end of 2022. MO maintains a strong balance sheet with a debt-to-EBITDA of 2.1x. They have strong financial means to pursue these opportunities. MO's portfolio of non-combustible products is growing, and the company continues exploring options to build an FDA-authorized portfolio of e-vapor products that will help smokers transition away from cigarettes and are growingly acceptable to modern society. However, MO continues to evolve and diversify its portfolio away from traditional cigarettes in meaningful ways. MO targets an 80% adjusted EPS-based dividend payout ratio for the near term, and this tells us that the current dividend is sustainable with room for modest annual raises.Ĭonsidering the scrutiny and stigma around traditional smoking, it makes sense why investors and Wall Street seem to shy away from the tobacco industry. This dividend is adequately covered by the company's FY22 EPS guidance between $4.81-4.89 (a 4.5-6% YoY growth), placing the payout ratio at 78%. MO's current annual dividend stands at $3.76, an impressive 8.3% yield! The company has proved itself to be an exceptional dividend king by raising its dividend annually for 53 consecutive years. MO has not only survived regulations and social stigma, but the company has also thrived while rewarding shareholders. E-cigarettes, heated tobacco, and vapor products are growing in popularity, and projections show that the profits from these new categories will surpass those of combustible cigarettes soon. Over the past decade, traditional smoking may have declined, but Big Tobacco companies are innovating to stay more relevant than ever with products that appeal to the modern generation. I'll tell you why I like the cigarette business. The Sage of Omaha's wise words remain relevant in modern society. And this is what makes tobacco a "bulletproof" investment. I am not a marketing or health expert, but if this isn't dissuading consumers from the habit, we have an incredibly sticky business. 60+ years later, the habit continues to be highly relevant in modern society. In the mid-1960s, the following series of warnings were made mandatory on cigarette packets. Public health advisors, medical professionals, regulators, and the general society has been frowning upon this product category since the sixties. The origins of MO can be traced back to 1902, and the industry has faced several headwinds. ( MO) is one company with incredible staying power. Pick #1: MO - Yield 8.3%Īltria Group, Inc. We have two picks with up to ~8% yields to get you on track for financial independence. With a well-defined dividend income stream flowing in, you no longer have to delay your retirement or hang on to an unrewarding job. It also becomes a concentration of income sources, making it vulnerable to several external factors outside your control.Ī well-diversified dividend portfolio is one of the most powerful and dependable passive income sources. But most of these methods involve skills, efforts, and/or expenses to set up and operate. You could write a book or develop an online course. You could list that spare room on Airbnb ( ABNB ) or rent your car on Turo. There are several ways to generate passive income. Passive income is the only way you can become financially independent. If you don't find a way to make money while you sleep, you will work until you die - Warren Buffett. His advice on the importance of passive income is precious and should be a motto for anyone who wants to achieve some form of financial independence. Buffett has been a wealth of wisdom for generations ahead. Through his years of investing experience, Mr. Buffett has consistently focused on the long term and never shied away from the markets when the near-term economic outlook was gloomy. And he made all of it just by investing diligently. He has compounded his money at such a high rate that he's now the seventh-richest person, with a net worth of nearly $100 billion. Warren Buffett is arguably the greatest investor of all time.
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