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Company: Altria Group (MO)
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98%
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89 votes

  Costs are lower than the competition, smokers wil always smoke even during recessions

Why is the cigarette business 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 owns Phillip Morris USA, Phillip Morris Capital Corporation, John Middleton, Ste. Michelle Wine Estates, U.S Smokeless Tobacco Company, and has a 28.5% stake in SABMiller (manufactures beer). As a tobacco company, Altria is somewhat shielded from poor economic conditions. Smokers will still smoke, people will still drink, regardless of the current interest rate.

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100%
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10 votes

  Altria, A 6.1% Dividend Yield and Double Digit EPS Growth: Nice

“Altria and its operating companies have dedicated employees, strong brands, remarkable cash flows, disciplined financial management, and an increasingly diverse tobacco product portfolio,” CEO Szymanczyk said in 2008, “I believe that these strengths should enable Altria to deliver consistent annual total shareholder return in excess of 12%.”

Altria declared its regular quarterly dividend of 38 cents per share (as of Dec 15, 2010), giving it a dividend yield of roughly 6.1%.

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100%
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6 votes

  Smart move to buy UST

Altria Group Inc.’s (MO) purchase of UST Inc. (UST), the largest smokeless-tobacco maker, could spark a wave of consolidation in the domestic tobacco industry.

Altria is the owner of Phillip Morris USA, maker of Marlboro cigarettes. It offered $69.50 per share in cash for UST, the maker of Skoal and Copenhagen brand snuff. Altria will also assume $1.3 billion in debt, bringing the total value of the deal to approximately $11.7 billion.

“The combination of Altria and UST creates the premier tobacco company in the United States with leading brands in cigarettes, smokeless tobacco and machine-made large cigars,” Michael E. Szymanczyk, Altria’s chairman and chief executive, said yesterday (Monday) in a statement.

It’s a smart move for Altria, which has had little success with its own Marlboro-branded smokeless tobacco products. Smokeless tobacco accounts for $3.7 billion in sales annually. It is the fastest growing segment of the tobacco industry.

UST manufactures the two most popular brands of smokeless tobacco for adult users. According to data from the U.S. Center for Disease Control, Skoal has a 28% market share and Copenhagen has a 22% share. Together, they make up half of the U.S. market.

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100%
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5 votes

  Dividend payments for the long haul

Dividend paying stocks seem to perform well over the long term. Let's take a look at Altria Group (MO) as an example. In his book The Future for Investors, Jeremy Siegel conducts a study on the performance of all of the stocks that originally comprised the S&P 500 when it was created in 1957. Looking at all of the stocks that were part of the original S&P 500 and still existed as of 2003, Dr. Siegel made an interesting discovery. Dr. Siegel states, "From 1897 through 2003, 97 percent of the total after-inflation accumulation from stocks comes from reinvesting dividends. Only 3 percent comes from capital gains."

He also discovered that the best performing stock during those 46 years was MO. According to Dr. Siegel, if you had invested $1,000 in MO in 1957 and reinvested the dividends in more MO stock over the years, you would have had $4,626,402 by 2003. That is an incredible 19.75 percent annualized return. To put this in perspective, the S&P 500 only delivered a 10.85 percent annualized return during that same period—which means a $1,000 investment in the S&P 500 in 1957 would have only turned into $124,486 by 2003.

Thanks to the magic of compounding, you would have made $4,501,916 more investing in MO than you would have investing in the S&P 500 ($4,626,402 - $124,486 = $4,501,916).

Currently, MO has a dividend yield of 7.9 percent. If you are looking to buy a stock and hold it for a while, MO is a great candidate.

Could MO continue to decline in value? Sure. All stocks are at risk of declining in value. If it does though, it will be easier to reinvest your dividends and buy even more shares of MO. Plus, when the market eventually turns back around and starts moving higher, MO is likely to move up right along with it.

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83%
agree
6 votes

  Marlboro is the most popular cigarette brand in the world

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.

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100%
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3 votes

  Altria's market share can't be attacked from normal advertising

With strict government regulation on marketing in the tobacco industry, Altria's market share can't come under attack from normal advertising. As a result, Altria doesn't have to spend exorbitant amounts of money maintaining its market share through advertising. Altria's Marlboro is the most popular cigarette brand in the world, selling more than the next seven leading international cigarette brands combined.

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100%
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1 votes

  NO fear of litigation

Remember when Microsoft was being sued by the FED? Maybe some thought that it was all over for MS right? They appealed, and appealed, and finally walked with a light fine and continued using their Hoover to vacuum up the profits. Now,there are those that want to think the sky is falling for Altria just because of litigation. Sure, that's where those bleeding hearts get to look at those sad sad pictures and "punish the evil corporation". However, these monster awards rarely hold up on appeal.

In the meantime, there are BILLIONS of new potentials in CHINA and INDIA. (cough, cough) The money comes in faster than they can schedule new court dates. I'm getting MY share while the party is on!

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50%
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6 votes

  An improved litigation environment

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

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