Investors seeking regular passive income could consider shares of the leading tobacco company, Altria Group (NYSE:MO). It is a Dividend Aristocrat (learn more about Dividend Aristocrats here). Further, it offers a compelling yield of nearly 10%, based on its annual dividend of $3.92 and its closing price of $40.18 on February 16.
Notably, Altria raised its quarterly dividend by 4.3% to $0.98 per share in August 2023. This marked the 58th time the tobacco giant has boosted its dividend in the last 54 years. Further, it denotes that Altria is a Dividend King, a term assigned to companies that have consistently increased dividends for at least 50 consecutive years.
With this backdrop, let’s understand whether Altria’s high yield is sustainable.
Altria’s Dividend Is Sustainable
The company’s high yield raises concerns regarding the sustainability of its payouts. However, Altria’s solid dividend payment history and future growth forecast ease apprehensions regarding the sustainability of its dividends.
For instance, Altria expects to grow its earnings at a CAGR of mid-single-digits through 2028. The company’s growing EPS base will enable it to deliver higher dividend payments. Notably, the company targets mid-single-digit dividend per share growth annually through 2028.
The company’s leadership in the U.S. tobacco space, growing smoke-free portfolio, and focus on reducing debt will likely drive its earnings and cover its payouts.
Is Altria Stock a Buy or Sell?
With two Buy, two Hold, and two Sell recommendations, Altria stock has a Hold consensus rating. Analysts’ average price target of $42.68 implies 6.22% upside potential from current levels.
Bottom Line
Altria’s solid dividend payment growth history and attractive yield show its commitment to return cash to its shareholders.
