After trading at lows not seen since 2009 Altria (NYSE:MO), whose shares yield 8.2%, sees no reprieve ahead. The company’s ownership in Juul is now a headwind. Hundreds of deaths reportedly related to e-cigarettes are souring the sentiment for tobacco stocks. It is no wonder, too, that cannabis stocks are under fire. If vaping poses a danger for e-cigs, it is also a health concern for CBD consumption.
Altria and Philip Morris (NYSE:PM) are evaluating a merger to boost shareholder value of the combined firms. But combining assets and shedding costs will not necessarily help stop either stock from falling. E-cigs face major regulatory headwinds. The outright banning of them in various states and countries, including India, takes away Altria’s post-cigarette growth market.
In general, e-cigarettes benefit former cigarette smokers because it poses less risk. Yet those under the age of 25 are dying for unknown reasons related to vaping. One thing is clear: governments are clamping down on advertising that targets the younger audience. For whatever reason, vaping is a health risk for the young.
At a 12 times P/E and 9 times forward earnings, MO stock is too inexpensive to ignore. Income investors cannot ignore the near-term risks but the over 8% dividend yield cannot be overlooked, either.
