For long-term dividend investors, MO stock (Altria Group) has been a cornerstone holding for decades. With its leading tobacco brands like Marlboro, MO generates steady profits and cash flows, allowing it to pay attractive dividends consistently.
But like other tobacco stocks, MO has faced pressure in recent years due to declining smoking rates, legal scrutiny, and concerns about the future. So how has an investment in MO stock 5 years ago worked out for dividend investors? Let’s analyze.
On February 1st, 2019, MO stock opened at $49.20 per share. $10,000 would have purchased around 203 shares at this price (ignoring trading commissions). As of January 31st 2024, MO closed at $40.12 per share, representing a decline of 18.46% over the 5 year period. Clearly, investors hoping for stock price appreciation have been disappointed.
However, for dividend investors, the story is different. Over the past 5 years, MO stock has consistently paid and grown its dividend, independent of any stock price volatility. In total, $10,000 invested on Feb 1st 2019 would have received $4,386 in total dividends by Jan 31st 2024.
Here is how those dividends break down on an annual basis:
2019 – $163 in dividends
2020 – $175 in dividends
2021 – $181 in dividends
2022 – $1,877 in dividends
2023 – $1,990 in dividends
The large jump in dividends in 2022 and beyond is due to MO’s current 9.69% dividend yield and higher dividend rate of $3.92 annually per share. For context, in 2019 the dividend was just $3.20 annually.
So while MO stock price has dropped 19% after 5 years, steady dividend growth of 23% over that timeframe along with the high current yield today results in a 43% total return from dividends alone.
Any investor who focused strictly on MO’s dividend income stream rather than its volatile stock price has done relatively well.
What drove this divergence between falling stock price but rising dividends? MO has struggled operationally – cigaret sales volumes continue their multi-decade slide.
However, MO maintains thick profit margins on premium tobacco brands, throws off ample free cash flow even on lower volumes, and has a management firmly committed to rewarding dividend investors.
Over $14 billion has been returned to shareholders via dividends and buybacks since 2019.
Roughly 40% of MO’s operating income continues to be paid out directly to shareholders. As long as tobacco profits persist and MO maintains capital allocation discipline, dividends should continue rising over time regardless of stock price action.
Of course, risks remain ever-present. Further volume declines, legal attacks on tobacco, or debt problems at MO’s investment JUUL Labs could jeopardize dividend growth and affect total return prospects for dividend investors. But management has reassured investors the payout remains safe.
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So if you had put $10,000 into MO stock 5 years ago looking for a steady income stream, you would have received over $4,300 in cash payments thus far, helping offset the fall in share price.
When including the current stock value and future dividend runway, total returns still look promising for income-focused investors ignoring near-term volatility.
Dividend History for MO Stock of Last 5 Years
| Ex/Eff Date | Type | Cash Amount | Declaration Date | Record Date | Payment Date |
|---|---|---|---|---|---|
| 12/20/2023 | Cash | $0.98 | 12/06/2023 | 12/21/2023 | 01/10/2024 |
| 09/14/2023 | Cash | $0.98 | 08/24/2023 | 09/15/2023 | 10/10/2023 |
| 06/14/2023 | Cash | $0.94 | 05/18/2023 | 06/15/2023 | 07/10/2023 |
| 03/23/2023 | Cash | $0.94 | 03/01/2023 | 03/24/2023 | 04/28/2023 |
| 12/21/2022 | Cash | $0.94 | 12/07/2022 | 12/22/2022 | 01/10/2023 |
| 09/14/2022 | Cash | $0.94 | 08/25/2022 | 09/15/2022 | 10/11/2022 |
| 06/14/2022 | Cash | $0.90 | 05/19/2022 | 06/15/2022 | 07/11/2022 |
| 03/24/2022 | Cash | $0.90 | 02/25/2022 | 03/25/2022 | 04/29/2022 |
| 12/22/2021 | Cash | $0.90 | 12/08/2021 | 12/23/2021 | 01/10/2022 |
| 09/14/2021 | Cash | $0.90 | 08/26/2021 | 09/15/2021 | 10/12/2021 |
| 06/14/2021 | Cash | $0.86 | 05/20/2021 | 06/15/2021 | 07/09/2021 |
| 03/24/2021 | Cash | $0.86 | 02/26/2021 | 03/25/2021 | 04/30/2021 |
| 12/24/2020 | Cash | $0.86 | 12/16/2020 | 12/28/2020 | 01/11/2021 |
| 09/14/2020 | Cash | $0.86 | 07/28/2020 | 09/15/2020 | 10/09/2020 |
| 06/12/2020 | Cash | $0.84 | 05/14/2020 | 06/15/2020 | 07/10/2020 |
| 03/24/2020 | Cash | $0.84 | 02/27/2020 | 03/25/2020 | 04/30/2020 |
| 12/24/2019 | Cash | $0.84 | 12/12/2019 | 12/26/2019 | 01/10/2020 |
| 09/13/2019 | Cash | $0.84 | 08/23/2019 | 09/16/2019 | 10/10/2019 |
| 06/13/2019 | Cash | $0.80 | 05/17/2019 | 06/14/2019 | 07/10/2019 |
| 03/22/2019 | Cash | $0.80 | 03/01/2019 | 03/25/2019 | 04/30/2019 |
| 12/24/2018 | Cash | $0.80 | 12/13/2018 | 12/26/2018 | 01/10/2019 |
Financial History for MO Stock of Last 5 Years
| Period Ending | 12/31/2022 | 12/31/2021 | 12/31/2020 | 12/31/2019 |
|---|---|---|---|---|
| Total Revenue | $25,096,000 | $26,013,000 | $26,153,000 | $25,110,000 |
| Cost of Revenue | $10,850,000 | $12,021,000 | $13,130,000 | $12,399,000 |
| Gross Profit | $14,246,000 | $13,992,000 | $13,023,000 | $12,711,000 |
| Research and Development | — | — | — | — |
| Sales, General and Admin. | $2,327,000 | $2,432,000 | $2,150,000 | $2,226,000 |
| Non-Recurring Items | — | — | — | $159,000 |
| Other Operating Items | — | — | — | — |
| Operating Income | $11,919,000 | $11,560,000 | $10,873,000 | $10,326,000 |
| Add’l income/expense items | $169,000 | -$595,000 | -$2,663,000 | -$10,005,000 |
| Earnings Before Interest and Tax | $8,447,000 | $4,986,000 | $8,099,000 | $2,046,000 |
| Interest Expense | $1,058,000 | $1,162,000 | $1,209,000 | $1,280,000 |
| Earnings Before Tax | $7,389,000 | $3,824,000 | $6,890,000 | $766,000 |
| Income Tax | $1,625,000 | $1,349,000 | $2,436,000 | $2,064,000 |
| Minority Interest | -$3,641,000 | -$5,979,000 | -$111,000 | $1,725,000 |
| Equity Earnings/Loss Unconsolidated Subsidiary | — | — | $13,000 | $5,000 |
| Net Income-Cont. Operations | $2,123,000 | -$3,504,000 | $4,356,000 | $432,000 |
| Net Income | $5,764,000 | $2,475,000 | $4,467,000 | -$1,293,000 |
| Net Income Applicable to Common Shareholders | $5,764,000 | $2,475,000 | $4,467,000 | -$1,293,000 |