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Buying Altria Group (MO)

Getting into vice.

music selection:  “One Headlight” — The Wallflowers

I have a rare move in my tIRA account today.  I’ve accumulated 10,000 in cash so its time for a new buy.  I mostly hold insurance companies with strong underwriting history in this account.  I’m diversifying a little bit with a very strong Dividend Aristocrat.  This is a buy and hold position rather than an options play.

Altria Group sells tobacco products and wine within the United States.  It yields about 3-1/4% and has raised its distribution for 47 consecutive years.  The company also buys back about a billion dollars of its own stock each year.  The P/E is very attractive at only 10.37.  Revenue is steady but gross margins are ticking higher with the most year coming in at a hair over 45% GM.  About half of pre tax operating income shows up as free cash flow indicating conservative accounting.

The underlying products are addictive and the brand identity of the products is strong.  This is a wide moat company.  The company is a 148 Billion market cap behemoth with a very low Beta of 0.50.  In the event of a market pullback, this one should hold up nicely.  The growing shareholder yield (dividends plus buy-backs) should result in strong financial performance for decades.  The balance sheet is also strong.  While there is 13.8 billion in long term debt, there are offsetting long term investments of 18.8 billion.  With a 15% return on assets, this one looks very strong.

I bought (tIRA) 130 shares at 76.59 for a total investment of 9,957.  This represents 6.64% of the tIRA account.

Devour your prey raptors!

{ 4 comments… add one }
  • Troy @ Market History June 17, 2017, 11:32 am

    Nice buy. I’ve been sitting on cash since late-May. I plan on buying UPRO (3x S&P 500 ETF) once the S&P makes a small correction

    • The Lizard King June 17, 2017, 1:40 pm

      Thanks for commenting. I’m cruising your blog this morning and finding it interesting. I don’t like double/triple levered instruments except as short positions. Especially UVXY which is cumulatively my biggest winner and the reason I was able to step away from the corporate grind at 40.

      I like your philosophy of being flexible (not taking in outside money) and having things more important than just money to live for.

  • Dividend Growth Investor June 22, 2017, 2:43 pm

    Actually, Altria is more expensive than you think. EPS is high due to a one-time item


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