Altria Lays Out a Transition to Smokeless Products. But It Begins With the Dividend.

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Altria Group,
maker of Marlboros and the largest U.S. cigarette company, has long viewed its dividend as the best way to return capital to investors. The approach is popular with its income-oriented retail base—an estimated 40% of shareholders, more than double the
S&P 500

Altria has raised the dividend for 50 years; it has a nearly 9% yield. Since 2010, it’s targeted a roughly 80% payout ratio of earnings to dividends, among the S&P 500’s highest. In early March, Altria cut its ties with e-cig maker Juul Labs—leading to a $12 billion loss—and bought smaller NJOY for $2.7 billion.

At a recent investor day, the company predicted mid-single-digit earnings and dividend growth through 2028, and said it would invest in smokeless products. When CEO Billy Gifford and Chief Financial Officer Sal Mancuso recently talked strategy with Barron’s, they emphasized the dividend. “It’s a top priority for investors and for us,” Gifford said.

Altria shares, at $44.50, are off nearly 16% in the past year and trade for under nine times projected 2023 profits of $5 a share, less than half
price/earnings multiple. Altria sees its payouts rising through 2028. “We’re providing investors with the confidence we have in our ability, even as we’re investing in this transition, to continue to grow the dividend per share over time,” said Mancuso.

Some investors favor a more balanced approach to capital allocation, given a steep dividend is high, cheap shares, and limited buybacks. The Juul loss could shield proceeds if Altria sells its $10 billion stake in
Anheuser-Busch InBev,
though Mancuso tamped down speculation of an imminent sale. Others just want that dividend.

Next Week

Monday 4/3

Walt Disney
hold their annual shareholder meetings.

The Institute for Supply Management releases its Manufacturing Services Purchasing Managers’ Index for March. Consensus estimate is for a 47.5 reading, about even with the February data. The index has had four consecutive readings below 50, indicating contraction in the manufacturing sector.

The Census Bureau reports construction spending data for February. Spending is expected to remain flat month over month at a seasonally adjusted annual rate of $1.83 trillion.

Tuesday 4/4

convenes a two-day investor meeting.

The Bureau of Labor Statistics releases the Job Openings and Labor Turnover Survey. Economists forecast 10.45 million job openings on the last business day of February, nearly 400,000 fewer than in January. Job openings are off their peak of 12 million in March of 2022 but remain historically elevated with 1.8 openings for every unemployed person.

Wednesday 4/5

ADP releases its National Employment Report for March. Consensus estimate is for the economy to add 200,000 private-sector jobs, about 42,000 fewer than in February. Wage growth increased 7.2% year over year in February, led by the leisure and hospitality industry with a 10.1% gain.

Conagra Brands
announces fiscal-third-quarter 2023 results.

holds an investor meeting in New York to discuss its Drive initiative, a cost-cutting plan that the company expects to deliver more than $4 billion in annualized savings by fiscal 2025.

Waste Management hosts an investor day to discuss its sustainability initiatives.

The ISM releases its Services PMI for March. Consensus call is for a 53.8 reading, slightly lower than in February. Unlike the ISM’s Manufacturing
the Services PMI is comfortably above the expansionary level of 50, and has had only one reading below 50 in the past two years, as postpandemic revenge travel and spending have kept the services sector strong.

Thursday 4/6

Constellation Brands
Lamb Weston Holdings
release earnings.

The Department of Labor reports initial jobless claims for the week ending on April 1. Jobless claims averaged 198,250 in March and remain stubbornly low even after the Federal Reserve’s many interest-rate hikes.

Friday 4/7

Equity markets are closed in observance of Good Friday. Fixed-income markets are open but close at noon ET.

The BLS releases the jobs report for March. Expectations are for nonfarm payrolls to increase by 200,000, 111,000 fewer than in February. The unemployment rate is seen remaining unchanged at 3.6%, near a historic low. Job growth has exceeded expectations for 11 consecutive months, the longest such streak since at least 1998, according to Bloomberg data.

Write to Andrew Bary at [email protected]

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