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Buy, Sell, Hold: Altria Group (NYSE: MO)

Altria: One Smokin' Hot Dividend Stock

By Steve Christ
Tuesday, April 20th, 2010

It goes without saying that the best way to break a bad habit is to kick it cold turkey.

But let's face it: old habits die hard, which is why Altria Group Stock (NYSE: MO) is always at the top of list for dividend-hungry investors. Because while cigarette smoking is a dangerous and noxious habit, it's an even tougher habit to quit — and that translates to big business, both here and abroad.

That's the bottom line that keeps the dividend of the largest U.S. tobacco company both rich and reliable — even in the midst of an economic downturn.

And whether you are comfortable with them or not, sin stocks have been as strong as ever over the last 12 months, especially in the world of tobacco products.

Big Tobacco is Alive and Well

Big tobacco means big profits. Here's why...

Increased regulation or not, the U.S. tobacco industry raked in combined annual revenue last year of $40 billion from more than 100 companies.

That has helped to put the major players such as Altria Group, Phillip Morris (NYSE: PM), Reynolds America (NYSE: RAI), and Lorillard (NYSE: LO) all on the uptrend; this industry is highly concentrated, with the largest companies holding nearly 100% of the market share.

Take a look:

 

altria chart

Not even the Family Smoking Prevention and Tobacco Act, signed into law by President Obama last June, could slow this sector down — despite the fact that the new law gives the FDA the power to regulate both the manufacture and marketing of tobacco products.

And while this certainly is not a positive development for the industry, it's nothing that will take "big tobacco" by surprise.

In fact, most analysts believe the new restrictions on these products will only allow the bigger players to garner an even larger market share.

So despite the industry expectation that cigarette consumption will decline by 4%-5% over the next few years, "Big Tobacco" operating profits will continue to rise modestly, as cost-saving efforts and consolidations wring more profit out of the bottom line.

As a result, the fundamental outlook for the tobacco industry for the next 12 months is positive — given favorable pricing trends, healthy free cash flow, and a relatively quiet legal environment.

As for Altria Group, it is currently throwing off a dividend that Warren Buffett would love at 6.7%. What's more, Altria's total shareholder return has outperformed the S&P 500 every year since 2000; the company has increased its dividend 43 times in the last 41 years.

And in this free six-page report,
The Wealth Advisory research team has broken down the tobacco giant, answering the question on every investor's mind these days...

Is Altria Group Stock (NYSE: MO) a Buy, Sell or Hold?

As a Wealth Daily reader, you can get your hands on our new report (for which we normally charge $29), absolutely free. Here's what you'll get:

  • The results from The Wealth Advisory's proprietary scoring model;

  • A buy, sell, or hold recommendation;

  • A 12-month Price Target along with a current Stop/Loss;

  • A technical and fundamental analysis of the company's share price;

  • And much more...

To download the report — including our Buy, Sell or Hold recommendation for Altria Group Inc. (NYSE: MO) — click here.

If you're a dividend-hungry investor, you'll receive our 5-stock "Dividend Money Machine" as part of a subscription to The Wealth Advisory. You can learn more about this service and how to maximize profits from dividend stocks right here.

I hope you enjoy your free Altria Group investment report. I'll be publishing more of these in the weeks to come.

After all, playing the stock market is one habit that I just can't break.

Your bargain-hunting analyst,

steve sig

Steve Christ, Investment Director

The Wealth Advisory

P.S. As I mentioned earlier, with their new jurisdiction over the tobacco industry, the FDA is getting more powerful by the day... Their rulings and regulations now have the power to not only make or break companies — but also entire industries. In the blink of an eye, the FDA has actually become one of Wall Street's prime catalysts for profit.  

My colleague Ian Cooper has been monitoring this story for some time now, and he recently gained access to a government file which actually pinpoints the precise dates that the FDA will rule on companies' new products.

The kicker: Ian's devised a way for investors to collect gains no matter which way that ruling goes...

It's pretty amazing. He's actually developed a "can't lose" strategy to exploit the FDA's undeniable market influence.

You can check out all the details in a free report he'll be releasing tomorrow. From what he's told me this could be big — very big — so stay tuned for Ian's latest report in your inbox.

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