Stocks That Will Hurt Your Retirement: Altria (MO)
Even 10 years ago, I probably would have considered Marlboro-maker Altria Group Inc (NYSE:MO) to be a rock-solid retirement stock.
After all, people have been smoking tobacco products since the Americas were discovered over 500 years ago. One might think that a half millennium is long enough to survive the test of time.
But unfortunately for Altria, the times really have changed. Due to rising health costs, virtually every government in the world has made it their objective to reduce smoking, particularly among teenagers. And it’s actually working; American teenagers are more likely to have used an illegal drug over the past year than smoked a cigarette.
It’s not necessarily a deal breaker to buy a stock in slow decline, so long as the stock is priced right. I’ve made good money trading tobacco stocks over the past 20 years when their prices have gotten sufficiently beaten down.
The problem is, tobacco stock are far from cheap today. Altria trades for over 20 times expected earnings and yields just 3.5%. That’s simply too high a price to pay for a company in terminal decline.