Altria Group (MO)

Why is the cig biz so good? Altria's cost to produce 1000 cigarettes is $16.40. Talk about profit margin! This is 16% to 21% lower than the competition. As a tobacco company, Altria is somewhat shielded from poor economic conditions. Smokers will still smoke, regardless of the current interest rate.

Altria Group (MO) reaffirmed its 2008 guidance for adjusted diluted earnings per share from continuing operations in the range of $1.63 to $1.67. This represents a growth rate of approximately 9% to 11% from an adjusted base of $1.50 per share in 2007. "This full-year earnings per share forecast reflects expected stronger earnings per share growth in the second half of this year when compared to the first half," said CEO Micheal Szymanczyk.

“Altria and its operating companies have dedicated employees, strong brands, remarkable cash flows, disciplined financial management, and an increasingly diverse tobacco product portfolio,” Mr. Szymanczyk continued and then said, “I believe that these strengths should enable Altria to deliver consistent annual total shareholder return in excess of 12%.”

Altria Group, Inc. (MO) on Thursday 28th Aug, announced that its Board of Directors voted to increase the company's regular quarterly dividend. The new quarterly dividend of $0.32 per common share is up 10.3% from the previous rate of $0.29 per common share, and represents an annualized rate of $1.28 per common share. The quarterly dividend is payable on October 10, 2008 to stockholders of record as of September 15, 2008. The ex-dividend date is September 11, 2008.

For those of you not very math proficient, that makes a $1.16 annual dividend for a nice very fat 5.25% yield. A 5% (and very safe and growing) yield and double digit earnings growth. Anything not to like? OK, sure tobacco kills but last I checked, Coca-Cola Company (KO) and Pepsico (PEP) were not "healthy for you" and folks have no qualms about investing with them.

At the current $20.90 a share price, that equates to a 6.1% dividend yield....

Altria's Marlboro is the most popular cigarette brand in the world, selling more than the next seven leading international cigarette brands combined. Not only that, it's one of the most popular brands period, up there with the likes of Coca-Cola and other iconic brands. As long as Marlboro's around, Altria will stay at the top of the tobacco market.

Why is the cig biz so good? Altria's cost to produce 1000 cigarettes is $16.40. Talk about profit margin! This is 16% to 21% lower than the competition. As a tobacco company, Altria is somewhat shielded from poor economic conditions. Smokers will still smoke, regardless of the current interest rate.

An improved litigation environment should make Altria's U.S. litigation expenses more stable and easily predictable.