Tobacco giant Altria (NYSE:MO) announced last week that it would be raising its dividend by 4.3%. Investors will now be collecting $0.98 per share, for a total of $3.92 annually. With the increase, the company's already high dividend yield is now up around 9%. That's about six times the S&P 500 average, which is around 1.5%. To earn $1,000 in annual dividends, you would need to invest approximately $11,100 in Altria based on its current payout. To get the same amount based on the S&P's average rate, then you're looking at an investment of more than $66,000.
There's a huge incentive for dividend investors to buy the tobacco stock for its high payout. Plus, this is also a Dividend King with a terrific track record for long-term dividend growth. This latest increase is the 58th time in the past 54 years that the company has bumped up its payouts. And sometimes the rate hikes have been significant.
The new $0.98 quarterly payment is more than double the $0.48 that the company was paying investors 10 years ago, back in 2013. That averages out to a compounded annual growth rate of 7.4% during that stretch.
Altria's payout ratio is at around 100% based on earnings. But when looking at free cash flow, there is a bit more room than that. In 2022, Altria generated just over $8 billion in free cash flow and the company spent $6.6 billion on its dividend payments.
Although the stock is down 4% this year, Altria could be a good dividend stock for investors to own given its high yield plus the company's track record for raising payouts.
