Dead-Weight Dividend Stocks: Altria (MO)
Why It’s Dead Weight: Expensive; Slow growth
Last but not least, while Altria Group Inc (NYSE:MO) has historically been one of the quintessential dividend stocks (currently paying out 3.6%) and has somehow found a way to continue growing despite the advent of e-cigs and outright cessation efforts, time has been catching up with the company. Indeed, it seems to have caught up with MO headed into the thick of 2017.
It’s a premise easy to counter just by pointing out how Bank of America analysts recently upgraded Altria to a “buy” and that its iQOS vaporizer will likely win the FDA’s approval as a safer alternative to actually burning tobacco.
There’s more bark than bite to the optimism, though.
Altria is still fighting an uphill battle it’s ultimately going to lose, and the stock’s price has rallied a lot faster than earnings have, or will in the foreseeable future. Last year’s 16% rally from MO has left the stock at a trailing price-earnings ratio of 25.4, and a forward-looking P/E of 20.3. Once traders figure out earnings only grew 8% last year and will likely only grow 10% this year (and that assumes iQOS is a hit), shares are apt to see pressure.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.