Big tobacco producers Altria Group and Philip Morris International have seen their stocks ascend over +30% this year. The allure of hefty dividends and proximity to 52-week peaks is catching the eye of investors. But is it the opportune moment to make a move?
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Increased Profitability
The shift towards smoke-free products has bolstered Philip Morris and Altria’s foothold in the tobacco market. Their foray into international markets with innovative offerings like non-burn tobacco and oral nicotine products is driving up profitability. Notably, the Zacks Tobacco Industry ranks in the top 10% among 250 Zacks industries.
According to Zacks estimates, Altria’s annual earnings are projected to rise by 3% in fiscal 2024 and a further 4% in FY25, reaching $5.30 per share. In comparison, Philip Morris is forecasted to expand its bottom line by 7% this year, with annual earnings expected to jump 10% in FY25 to $7.10 per share.
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Valuation Comparison
Altria’s stock, priced around $54, trades at a forward earnings multiple of 10.6X, slightly below the industry average of 12.7X. On the other hand, Philip Morris shares, at $125, carry a 19.5X forward earnings multiple, commanding a premium over the industry and Altria but staying under the S&P 500’s valuation of 23.2X.
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Lucrative Dividends
Investors are enticed by the substantial dividends offered by Philip Morris and Altria. While Philip Morris leads in bottom-line growth, Altria’s annual dividend yield of 7.25% coupled with its attractive valuation presents a compelling case. Both giants surpass the industry average and tower over the S&P 500’s typical yields.
Moreover, Altria boasts a track record as a Dividend King, having raised payouts for over 50 consecutive years.
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Bottom Line
Philip Morris International holds a Zacks Rank #2 (Buy) due to its promising earnings outlook, while Altria Group secures a Zacks Rank #3 (Hold). Earnings forecasts for Philip Morris remain robust, though Altria’s estimates have seen a slight decrease. Nevertheless, both tobacco titans remain compelling long-term investments given their attractive dividends and reasonable valuations.
Is it Time to Dive Into Big Tobacco Stocks?
Are Altria Group and Philip Morris International the hidden gems ready to unveil massive returns in 2024? With dividends on the rise and global expansion strategies in place, the potential for growth is enticing. While financial analysts have their say, will the allure of these tobacco giants prove irresistible for investors seeking a profitable portfolio addition?
