Altria Group. Flickr Image.
Altria Group (NYSE:MO) is a cash dividend-paying company.
It has been paying cash dividends continuously since 1989 according to the company’s dividend information page.
Therefore, Altria has been a dividend payer for a little over 30 years as of fiscal 2021.
In fact, Altria has increased its dividend rates year over year without fail in the past 10 years.
Therefore, Altria is a strong dividend payer committed to returning as much cash as possible to shareholders.
Aside from paying a reasonable amount of cash dividends, Altria also buys back its common stocks at more than $1 billion USD per year on average in the past.
While Altria has temporarily suspended its stock buyback in fiscal 2020, the company has resumed the stock buyback in fiscal 1Q 2021.
Year to date in 2021, Altria has spent more than $600 million on stock buyback and more than $3 billion on cash dividends.
Therefore, Altria has already returned nearly $4 billion of cash to shareholders in the 1st half of fiscal 2021.
In this article, we will look at several of Altria’s dividend metrics, including the trailing dividend yield, annual and quarterly dividend rates, cash payments on dividends, forward dividends for 2021, dividend payout ratios, and etc.
Last but not least, we also will find out if Altria can maintain its cash dividend payment in fiscal 2021 and if it can even increase the dividend rates in the same fiscal year and by how much.
So, let’s sit back and continue reading!
Altria’s Cash Dividend Topics
1. Trailing Dividend Yield
2. Annual Dividend History
3. Quarterly Dividend History
4. Cash Payments For Dividends
5. Forward Dividend In 2021
6. Projected Earnings For 2021
7. Projected Operating Cash Flow For 2021
8. Projected Free Cash Flow For 2021
9. Dividend To Earnings Payout Ratio
10. Dividend To Free Cash Flow Payout Ratio
11. Summary
Altria’s Trailing Dividend Yield
Altria’s trailing dividend yield
* Dividend yields are calculated on a trailing 12-month (TTM) basis and include all Altria’s special dividends.
* Adjusted weekly close price for splits is used in dividend yield calculation in the chart above.
Let’s first look at Altria’s historical dividend yield as shown in the chart above for the period from 2015 to 2021.
As seen in the chart, Altria’s trailing dividend yield has been rising steadily in the last 6 years, thanks to the company’s falling stock price during the same period.
However, the falling stock price is only partially contributing to the soaring dividend yield.
Between 2015 and 2021, Altria also has been growing its dividend rates, thereby causing the yield to soar.
In fact, Altria’s dividend payout was the highest as of the latest quarter in 2Q 2021 on a quarterly basis.
Historically, Altria’s trailing dividend yield hovered around 4%.
However, the dividend yield has risen to as high as 10% in 2020, primarily attributed to the plummeting stock price during the onset of the COVID-19 outbreak.
As of August 2021, Altria’s stock price has recovered significantly and the dividend yield has dropped slightly to 7%.
At the current dividend rate, Altria’s dividend yield is one of the highest among the S&P500 companies.
Additionally, the 10-Year U.S. Treasury yield of 1.3% pales in comparison to Altria’s dividend yield of 7%.
Altria’s Annual Dividend History
Altria’s annual dividend per share declared
* Annual dividend rate history is obtained from Altria’s financial reports.
* Altria’s fiscal year begins on Jan 1 and ends on Dec 31.
On a yearly basis, Altria has been a consistent dividend payer without fail, as reflected in the growing dividend rates shown in the chart above.
As seen in the chart, Altria’s annual dividend rate stood at $3.40 USD per share in fiscal 2020, a record high for the company and shareholders.
Keep in mind that Altria has been paying dividends since 1989 as opposed to the results shown in the chart above which depicts only the 10-year dividend history.
On average, Altria has managed to grow its annual cash dividends by about 9% between fiscal 2010 and 2020.
While Altria’s annual dividends have been on a rise in the last 10 years, its growth rate was the slowest in fiscal 2020, with a year-over-year dividend growth rate recorded at only 3.7%.
Despite recording the slowest dividend growth rate in 2020, Altria was still one of the best dividend payers in the world.
Unlike other dividend payers which may have partially or even totally suspended the cash dividends during one of the world’s worst pandemics, Altria has not only kept the cash dividends but also raised it by 3.7%.
Altria’s Quarterly Dividend History
Altria’s quarterly dividend per share declared
* Quarterly dividend rate history is obtained from Altria’s financial reports.
* Altria’s fiscal year begins on Jan 1 and ends on Dec 31.
On a quarterly basis, Altria’s cash dividends declared to common stock shareholders have risen steadily between fiscal 2019 and 2021.
Similar to its yearly dividends, Altria has never missed a single payout in its quarterly cash dividend payouts, even during the COVID age.
You can see from the chart that Altria raised its quarterly dividends from $0.84 USD per share to $0.86 USD per share in fiscal 2020, a year-on-year increase of 2%.
As of fiscal 2Q 2021, Altria’s quarterly cash dividend remains at $0.86 USD per share, representing an annualized dividend rate of $3.44 USD per share.
Altria’s Cash Payment For Dividends
>Altria’s cash payment for dividends declared
* Cash payment for dividend declared is obtained from Altria’s consolidated statements of cash flow.
* Altria’s fiscal year begins on Jan 1 and ends on Dec 31.
The chart above shows how much the cash dividends had cost Altria in terms of cash payments.
For example, Altria’s cash dividend of $3.40 USD per share declared in fiscal 2020 had cost the company $6.3 billion.
Similarly, Altria paid a whopping $6.1 billion to shareholders in fiscal 2019 for the $3.28 annualized dividend per share.
The growing cash payment is a direct result of the growing annualized dividends per share declared.
Over the last 10 years, Altria’s cash payment for dividends declared has more than doubled, growing from only $3 billion reported in fiscal 2010 to more than $6 billion reported in fiscal 2020.
In short, Altria has been returning a massive amount of cash to shareholders in the form of cash dividends, totaling more than $6 billion as of fiscal 2020.
Altria’s Forward Dividend In 2021
| Fiscal Year | Dividend Declared Per Common Share ($ USD) | Common Shares Outstanding (In Millions) | Cash Payment For Dividends ($ Millions) |
|---|---|---|---|
| FY2018 | $3.00 | 1,874 | $5,415 |
| FY2019 | $3.28 | 1,858 | $6,069 |
| FY2020 | $3.40 | 1,858 | $6,290 |
| FY2021 Projected | $3.44 | 1,842 | $6,336 |
The table above shows a part of Altria’s trailing dividends and the expected forward dividends in FY2021.
In fiscal 2021, Altria is expected to shell out as much as $6.3 billion in cash for the annualized cash dividend per share of $3.44.
At this dividend rate, Altria’s dividend growth will only be 1.2% in FY2021, the lowest the company has ever reported in the last 10 years.
Despite the slowing dividend growth, Altria’s annualized dividend yield will come to a massive 7.2% based on today’s stock price of $48 USD per share.
The question is can Altria’s fundamentals keep up with the growing dividend payout in FY2021?
Let’s find out here.
Altria’s Projected Earnings For FY2021
| Fiscal Year | Diluted Earnings Per Share – Company Adjusted ($ USD) | Weighted Average Diluted Shares Outstanding (In Millions) | Adjusted Net Earnings ($ Millions) |
|---|---|---|---|
| FY2018 | $3.99 | 1,888 | $7,539 |
| FY2019 | $4.22 | 1,869 | $7,895 |
| FY2020 | $4.36 | 1,859 | $8,117 |
| FY2021 Projected | $4.59 | 1,843 | $8,459 |
Altria guided that it is going to earn an adjusted diluted EPS between $4.56 and $4.62 in 2021, representing a growth rate of 4.5% to 6% from an adjusted diluted EPS base of $4.36 in 2020.
Taking the average of the guided EPS, the adjusted diluted EPS will be $4.59 per share as shown in the table above.
Since Altria has resumed its stock buyback in 2021 and has already spent up to $650 million year-to-date, Altria’s diluted shares outstanding will be approximately 1,843 million by the end of 2021, about 16 million shares lower than the figure in 2020.
This number was projected based on the amount of share buyback carried out in fiscal 2019 in which Altria had spent $845 million to buy back 16.5 million common stocks.
Assuming that Altria will spend about the same amount of cash on shares buyback in FY2021 as in FY2019, Altria’s diluted shares outstanding will come to 1,843 million by the end of 2021 when approximately 16 million shares (adjusted for stock awards) are bought back.
This number is on the lower end of the calculation as Altria’s stock price was much higher back in 2019.
With this information available, Altria’s adjusted net earnings will be approximately $8,459 million ($4.59 X 1,843) in fiscal 2021.
Altria’s Projected Operating Cash Flow For FY2021
| Fiscal Year | Adjusted Net Earnings ($ Millions) | Net Cash From Operations ($ Millions) | Cash Conversion Rate |
|---|---|---|---|
| FY2018 | $7,539 | $8,391 | 1.11 |
| FY2019 | $7,895 | $7,837 | 0.99 |
| FY2020 | $8,117 | $8,385 | 1.03 |
| FY2021 Projected | $8,459 | $7,740 | 0.915 |
Estimating Altria’s net cash from operations is crucial in our analysis of the company’s dividend in 2021 as dividends are paid out of cash generated from the company’s business operations.
That said, the table above shows the linear relationship between Altria’s adjusted net earnings and net cash from operations.
For example, if Altria’s adjusted net earnings decline, so would the net cash from operations and vice versa.
Therefore, the cash conversion rate between Altria’s adjusted net earnings and net cash from operations is almost on a 1-to-1 basis as shown in the table above.
Instead of using the 1-to-1 conversion rate, we are going to measure the average figure for the past 10 years.
Taking the average of the cash conversion rates for the past 10 years, Altria’s average cash conversion rate comes to about 0.915 as shown in the table above.
This average figure is a more pessimistic figure.
All told, Altria’s operating cash flow is estimated to be about $7.7 billion for fiscal 2021 based on the average conversion rate.
Altria’s Projected Free Cash Flow For FY2021
| Fiscal Year | Net Cash From Operations ($ Millions) | Capital Expenditures ($ Millions) | Free Cash Flow ($ Millions) |
|---|---|---|---|
| FY2018 | $8,391 | $238 | $8,153 |
| FY2019 | $7,837 | $246 | $7,591 |
| FY2020 | $8,385 | $231 | $8,154 |
| FY2021 Projected | $7,740 | $231 | $7,509 |
Similarly, free cash flow is another important cash metric when it comes to dividend analysis.
Free cash flow is derived from net cash from operations after adjusting for capital expenditures.
Therefore, free cash flow is the cash left over after paying for investments necessary for the expansion of the business.
Assuming that Altria’s capital expenditure in FY2021 will be the same as that in FY2020 which is $231 million, Altria’s free cash flow will be about $7.5 billion as shown in the table above.
Altria’s Dividend To Earnings Payout Ratio
| Fiscal Year | Dividend Per Share ($ USD) | Diluted Earnings Per Share – Company Adjusted ($ USD) | Dividend To Earnings Payout Ratio |
|---|---|---|---|
| FY2018 | $3.00 | $3.99 | 75% |
| FY2019 | $3.28 | $4.22 | 78% |
| FY2020 | $3.40 | $4.36 | 78% |
| FY2021 Projected | $3.44~$3.60 | $4.59 | 75%~78% |
Altria is expected to pay out a total dividend of $3.44 USD per share in fiscal 2021.
For this dividend rate, the dividend-to-earnings payout ratio will come to about 75% as shown in the table above.
Therefore, the estimated payout ratio is reasonably within reach for Altria.
Altria is in a good financial position to pay out an annualized cash dividend of $3.44 USD per share for the entire year in 2021.
In fact, Altria can even afford to raise the dividend to as much as $3.60 USD per share for fiscal 2021 if it were to achieve a dividend-to-earnings payout ratio of 78%.
Historically, Altria has done this before as seen in the table above for fiscal 2019 and 2020.
The good news is that Altria has managed to declare and even raise the distribution in one of the worst recession ever recorded in history and that was in 2020 when the COVID-19 strikes.
Therefore, if Altria could make it in 2020, it has no reason for not being able to make it again in 2021.
If Altria were to pay out as much as $3.60 USD per share as cash dividends in 2021, the year-over-year dividend growth will be 6%, nearly double that of 2020.
At a dividend rate of $3.60 per share, the annualized forward dividend yield will be a massive 7.5% based on today’s stock price of $48.
Altria’s Dividend To Free Cash Flow Payout Ratio
| Fiscal Year | Cash Payment For Dividends ($ Millions) | Free Cash Flow ($ Millions) | Dividend To FCF Payout Ratio |
|---|---|---|---|
| FY2016 | $4,512 | $3,602 | 125% |
| FY2017 | $4,807 | $4,723 | 102% |
| FY2018 | $5,415 | $8,153 | 66% |
| FY2019 | $6,069 | $7,591 | 80% |
| FY2020 | $6,290 | $8,154 | 77% |
| FY2021 Projected | $6,336 | $7,509 | 84% |
As shown in the table above, Altria’s dividends-to-FCF payout ratio comes to about 84% for the estimated figures in fiscal 2021.
This ratio is on the high side for other dividend-paying companies but not for Altria.
As seen in the table, Altria has historically paid out dividends at a much higher free cash flow payout ratio.
For example, Altria’s dividends-to-FCF payout ratio clocked in at 125% and 102% in fiscal 2016 and 2017 respectively.
In fact, Altria’s dividend-to-FCF payout ratio for the past 10 years measures at a massive 90% on average.
Therefore, even if Altria were to raise the annualized cash dividend to $3.60 USD per share for FY2021 as discussed in prior paragraphs, the dividend-to-FCF payout ratio will only come to about 88%, still a manageable level for the company.
Again, if Altria could endure the 90% dividend-to-FCF payout ratio in 2020 in which one of the world’s worst recorded recessions has hit, it can definitely do so now at a 88% payout ratio, let alone the 84% payout ratio.
In short, the high dividend-to-FCF payout ratio should not pose a problem for Altria as the company had been distributing cash dividends that were close to this level of payout ratio for the last 10 years.
Summary
Is Altria’s cash dividend safe in 2021?
Definitely.
Not only will Altria be able to pay an annualized dividend rate of $3.44 USD per share but also the company may even be able to raise it to $3.60 USD per share.
At an expected dividend rate of $3.44 USD per share in 2021, Altria’s dividend payout ratio comes to about 75% and 84% with respect to adjusted earnings and free cash flow, a level that the company can definitely tolerate.
In fact, Altria even has the capacity to raise the cash dividend to $3.60 USD per share in 2021 which will bring the payout ratio to about 78% and 88% with respect to adjusted earnings and free cash flow.
All in all, Altria’s cash dividend in 2021 is absolutely safe.
References and Credits
1. All information including financial figures and data discussed in this article was obtained and referenced from financial statements obtained through the company’s official website: Altria SEC Filings.
2. Some numbers and ratios are the author’s own calculations.
3. Featured images in this article are used under creative commons license and sourced from the following websites: Ivan Radic.
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