The 2 Best High-Yield Dividend Stocks In A Decade

That’s a problem. In case you haven’t heard, cigarettes are bad for you. The volume of cigarette smoking is declining by about 4% to 6% per year. Of course, it has been declining at about 4% for decades. And over that time Altria has been able to more than compensate for the declines by raising prices and buying back shares. The company still grew annual earnings at a solid rate and had been one of the best-performing large-cap stocks in the index.

But things are changing.

The rate of annual volume declines is increasing because more people are opting for E-cigarettes, especially young smokers. To answer that problem, Altria purchased a 35% stake in dominant e-cigarette brand JUUL in late 2018 for $12.8 billion. It has since been the acquisition from Hell. JUUL has been under relentless assault by regulators primarily for marketing to young people. There is now even a question if e-cigarettes will be allowed to operate at all.

Altria has already written down $8.6 billion of the investment. The market hasn’t liked this and the stock is down about 50% from the 2017 high and near a 5-year low.

But here’s the thing. If e-cigarettes get sued out of business Altria will sell more cigarettes. If e-cigarettes survive, Altria owns the dominant company in the space. It will ring the register either way. Plus, Altria has other growth opportunities in marijuana (it purchased a 45% stake in Cronos) and a joint venture with Philip Morris International to sell heated tobacco e-cigarette product iQos nationally.

In the meantime, the company continues to grow earnings per share. Management is forecasting high single-digit annual growth for the next several years. Earnings grew over 18% in the first quarter as people are smoking more during the pandemic.

The Dividend

Is that massive 8.9% yield safe? I think it is rock solid. The company has a rather high 80% payout ratio, but that is the historical average. And the company has raised the payout every year for the last 50 years.

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Now, if you want to know what other dividend stocks I like now – some of the high-yield variety, others more focused on dividend growth and safety – you can subscribe to my  more

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