Altria's Valuation has Never Been Worse

If you are among the people who would never own tobacco-related stocks then you certainly are not long Altria (MO), previously called Phillip Morris.

MO’s long-term holders, focused solely on making money, have had a nice run since the bottom of the market in 2009. In early 2010, the stock was still priced under $20 while sporting a 10.2x multiple and a juicy 7.64% yield.

The Fed’s ZIRP (Zero Interest Rate Policy) made MO even more addictive for income seekers as competing fixed income rates fell to record low levels. Wednesday’s trading saw MO make an all-time high since the spin-off of Phillip Morris International (PM).

So, “What’s the problem?”.

Altria has never been remotely as expensively valued as it is today. At $54.27 the shares trade for 21.3x the expected, but yet to be released, 2014 EPS and 19.4x Value Line’s projection of $2.80 for the year ahead.

Both numbers are well higher than MO’s 15.2x average multiple for the 2010 – 2015 period. Today’s 3.84% dividend might seem tempting but it pales beside MO’s typical yield of 5.54%.

Value investors should shy away from paying more than anybody else for the exact same merchandise. The smartest entry points (marked with green stars) came at P/Es of 10.2x – 14.2x along with yields from 5.79% - 7.64%.

Read More at: GuruFocus.