In a turbulent market, MO is one stock which operates independent of the economic landscape. Cigarettes are a legal U.S. product. Some people choose to smoke. Key rationale for buying this stock include:
MO has a .45 beta compared to the overall stock market. When other equities are volatile, MO's stock price trades within a narrow range. MO has traded between $22.75 - $28.13 for the past 52-weeks.
MO's dividend has been raised 45 times in the past 42 years. Management is clear on rewarding shareholders with sharing profits and sound financial decisions.
MO continued to show investors that dividend increases are a key focus. On August 26th, 2011, MO increased their quarterly dividend 7.9% from 38 cents per quarter to 41 cents per quarter. The annual dividend yield is 6.1% based upon a $26.72 MO stock price.
MO continues to aggressively buy back shares. On January 27th, the company committed to buying back $1 billion in MO shares during 2011.
MO continues to see progress in smokeless tobacco sales and wine sales. These product lines will provide growth markets for the upcoming years.
MO, on July 20th, confirmed that earnings per share (not counting one-time adjustments) will increase between 6-9% for the year. EPS figures should arrive at $2.01 - $2.07 per share. This represents a reasonable 13x price-to-earnings multiple for a sound company.
In 2011, Fortune magazine ranked MO number one in the tobacco industry for financial soundness and long-term investment.
Reynolds American Inc. (RAI)
Reynolds American is the second leading cigarette producer in the United States, behind Altria. Core brands include: Winston, Doral, Camel, Salem, Pall Mall, Kool, and Vantage. Winston and Camel are the key brand names in terms of revenues. BTI owns 42% of RAI common stock. RAI sold their international business to Japan Tobacco in 1999. RAI management has been more aggressive in dividend increases than stock buybacks. This is due to BTI's significant RAI-ownership.
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