Dividend -paying companies are a good way to earn regular income. This type of passive income may appear to be tempting as you get it out of normal work.
Altria Group (NYS: MO) has a long history to pay dividends. With some basic mathematics, you can calculate how many stocks you need to get in the $ 10,000 anniversary dividends.
After that, you have to do a few homework to make sure the company can continue to pay dividends and whether you should buy shares.
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The Board of Directors of the Altria increased the quarterly benefit of the October to $ 1.06 per share compared to the previous $ 1.02. A new rate of $ 4.24.
Based on the higher quarter -dividends, you will need about 2,360 shares to obtain a $ 10,000 annual dividend. The calculation assumes that dividends remain constant. Buying a shares will cost you nearly $ 157,000, taking into account $ 66.29 on October 1.
This is a big investment. Of course, the exercise simply illustrates what you need to invest to get a targeted annual benefit. You can adjust your investment accordingly.
Altria grows dividends every year. The recent increase in increase in 56 years.
It gives an altria to a good and rare company. Companies that have raised dividends for at least 50 years belong to a selected group called Dividend Kings.
Altria certainly has an impressive not only for payment but also for lifting, dividend. However, one more important step must be taken before pulling the trigger and investing.
It looks at the basics to better understand the business and determine whether the Altriad dividends are sustainable for a long time.
The shares have 6.4% of the dividend yield, much larger than S&P 500 Index 1.2%. The index includes large capital companies, making it a suitable measurement stick, taking into account the capitalization of the Altria market.
Occasionally, high yields can mean unsustainable dividends. When the Altria payout ratio is 79%, the company seems to be able to afford benefits in a short period of time.
However, in the long run, Altria will have to increase revenue to gain higher profits and continue to make dividends. The company sells tobacco products in the US. Although the management expects to get more income from smoke -free products, this is not the case at this time.
The Altria Smoking Product Unit, calculating most of the company’s revenue, decreased by 0.4% per year compared to $ 4.6 billion, except for $ 4.6 billion. The section accounted for 86% of the highest period.
However, the Tom continued to decline and the company’s products remained as the market share was lost. Of course, this is not a recipe for long -term success.
Altria’s oral tobacco product unit, which includes certain basic tobacco products without smoking, increased by 6% income to $ 728 million. USD (except excise tax). Although it sounds promising, the higher top line also resulted from the fact that the management has determined the increase in prices. The volume decreased by 1%and the products lost their market share.
The total revenue of Altria’s second quarter was essentially equal, with increased 0.2%. However, this is due to higher prices. Given that the company’s volume is reduced and market share losses, this is not sustainable. After all, the basic theory of economics is that higher prices lead to lower demand.
With the basics of business, I would currently hand over the shares. Although shares have a juicy dividend yield, and the company’s current finances do not mean that paying is at risk, business must revive income growth. Of course, increasing prices and losing volume will not lead long -term success.
You can find better businesses with better dividend yields on the market, and a long history by increasing benefits.
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Lawrence Rothman has no position in any of the above shares. The Motley fool has no position in any of the above stocks. The Motley fool has a disclosure policy.
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