Altria Fires Up Dividend Hike, Riding Smokeless To $30 Stock Price

On Friday, Altria increased its dividend by 7.9% to $0.41 per common share, making it 45 times in the last 42 years that the company has hiked the dividend. With a set of new product launches in addition to its strong product mix and pricing power, the Altria Group is well positioned to grow in the smokeless tobacco segment.

Altria, previously named Philip Morris Companies Inc., is the parent company of Philip Morris U.S.A, John Middleton, Inc., United States Smokeless Tobacco, Inc., Philip Morris Capital Corporation and Chateau Ste. Michelle Wine Estates. It owns several leading cigarette and smokeless tobacco brands that include Marlboro, Copenhagen, Skoal and Black and Mild.

Altria competes with Reynolds American and Lorillard, two of its biggest competitors in the U.S.

We have a near $29.60 price estimate for Altria Group, Inc., which is about 15% ahead of the current market price.


Smokeless tobacco: The only growing tobacco segment

Smokeless tobacco is the only segment that has been growing for the company in the past several quarters. Altria’s smokeless segment’s revenues grew by 14% in 2010 and is expected to grow by 9% this year. The cigarettes segment, which currently contributes over 70% of tobacco sales in the U.S., is continuously seeing volume declines due to growing health consciousness among consumers, a ban on public smoking as well as high excise taxation on tobacco products and other legislative controls.

Smokeless products, however have come up as an alternative to cigarettes. Not only can they be consumed in places where smoking is banned but are perceived by users as less harmful than traditional cigarettes. In addition they are taxed less than cigarettes (less than 10% compared to more than 40% for cigarettes) for being perceived as products that help people quit smoking.