Altria (NYSE:MO) Establishes as Top Dividend Stock

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By Thomas Copeland on November 18, 2014 Company

Altria (NYSE:MO), the famous tobacco company is fast setting itself as the most wanted dividend stock. The fast growing income stock trends is setting the company on a quick pace to establishing in the market as well as staying ahead of its competitors by a massive margin.

Altria (NYSE:MO) has set itself at 29% growth in its stocks in the current fiscal year, finishing way ahead of the 10% gain estimate projected by S&P 500. According to analysts, there are four major reasons that have enabled Altria (NYSE:MO) to set itself as a most favourable choice for investors to put their capital in, and how it has managed to outclass local and international competitors, the like of Reynolds American (NYSE:RAI) and Philip Morris International (NYSE:PM).

A high revenue and pay-out share: Altria (NYSE:MO) has managed a total of 4.6% in annual dividend return, which is higher than Reynolds (NYSE:RAI)’ 4.2%. These are quite remarkable when compared with the S&P predictions of 1.9% in annual dividend returns.

The annual pay-out share for the tobacco company is 88.5%, against its rival’s 86.5%. Both these companies have managed likable figures when it comes to the dividend yield, but Altria (NYSE:MO)’s figures have always shown a slight hike against Reynolds American (NYSE:RAI). For the years 2012, 2013 and 2014; a raise of 7.3%, 9.1% and 8.3% have been noted in the quarterly dividend figures.

Altria (NYSE:MO) has also won the international battle against rival Philip Morris (NYSE:PM). The later generated 4.5% in dividend, 73% in pay-out ratio and 6.4% increase in dividend, for the current fiscal year.

Strong yield on Equity: the real performance of Altria (NYSE:MO) can be measured by considering ROE (return on equity) status. Higher ROE figures indicate better yield for investor capital. Companies that have higher ROEs consider reinvesting the generated yield to expand. However, the tobacco market is declining, even in the established infrastructures. Hence, these companies prefer to pay dividends and buy-back stocks with the generated returns.

In the past 12 months, Altria (NYSE:MO) has 103.4% ROE. The ROEs for Reynolds (NYSE:RAI) and Philip Morris (NYSE:PM) are 32.1% and -91%. This is a remarkable difference, and the negative ROE of Philip Morris (NYSE:PM) is a cause of concern for investors and the company itself. However, the negative figure is due to the company’s debts engaged to buy its stocks back. As soon as the company clears its debts, the ROE is expected to return to a higher figure.

A Healthier Cash Flow: in order to get a view of the value a company awards to its shareholders is signified by the FCF percentage or the FCF pay-out share. According to latest figures, Altria (NYSE:MO) put forth 86% FCF pay-out ratio. Reynolds (NYSE:RAI) and Philip Morris (NYSE:PM) managed 92% and 66% FCF pay-out ratios, respectively. On this scale, Reynolds (NYSE:RAI) seems to be the brand that truly values its investors. However, Altria (NYSE:MO) doesn’t lag behind by a huge market, and has been improving its figures in this regard.