Altria Group (NYSE: MO) is an income investor’s dream come true. The stock pays a quarterly dividend of $1.02, which works out to an annual dividend of $4.08 per share. As of this writing, the stock’s yield (dividend payment divided by stock price) is 8.2%. That could make it an excellent choice for anyone focused on generating income from their stock portfolio.
Overall, the company is expected to pay out roughly $7 billion worth of dividends this year and in 2025. However, some developments could change that.
When the company announced its most recent dividend increase in August 2024, it represented the 59th such increase in the last 55 years for Altria (the company formerly known as Phillip Morris).
Indeed, dating back to 1985, Altria has increased its dividend by more than 2,300%. Further, that includes the significant dividend cut that occurred when it spun off its Philip Morris International business and sold its majority stake in food giant Kraft (which later became part of Kraft Heinz).
Crucially, for a deep-value stock like Altria, the company’s dividend looks stable. Altria has a payout ratio of 68% — meaning that about two-thirds of its profits go toward covering dividends. Generally speaking, income-seeking investors prefer payout ratios below 75%. If a company needs to use more of its profits than that to cover its dividend obligations, management could find itself unable to make further hikes, and might even need to cut the payouts.
That said, investors interested in Altria stock should monitor its payout ratio. Altria’s appealing dividend could be at risk if it rises too high.
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Jake Lerch has positions in Altria Group and Philip Morris International. The Motley Fool recommends Kraft Heinz and Philip Morris International. The Motley Fool has a disclosure policy.
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