Altria Group (NYSE"MO) is trading in a sustained downtrend that began at the end of March. Continued worries over JUUL’s prospects and constant concerns for its cigarette business is hurting the stock. Yet the stock is a compelling dividend-income holding.
Altria stock pays a dividend yielding 6.9%, after it increased its quarterly dividend by 5%. This marks the 50th consecutive year its dividend rose. The dividend is payable on Oct. 10 for shareholders of record Sep. 16.
Concerns over JUUL’s prospects are warranted because San Francisco banned its sale. Altria must get FDA approval to reverse the decision. Yet vaping is less dangerous than cigarettes.
As millions of smokers switch to Juul to kick the habit, Altria’s sales for Juul should grow steadily. And for those who get off tobacco, move on to Juul, and eventually quit both, it is clear that Juul plays a positive role in cutting down the number of smokers.
On Aug. 19, Juul raised $325 million through an equity and debt offering. This should give the unit plenty of resources to fund R&D activities and to develop the product. If Altria ends up buying Juul, this might explain the downtrend in MO stock. Still, Juul’s long-term prospects outweigh the short-term risks of such a buyout.
Altria stock is oversold and its prospects for steady income ahead outweigh the risks.
