Should You Buy Altria Group Stock for Its 6.1%-Yielding Dividend?

Altria (NYSE: MO) has been a apical dividend maturation banal for investors to ain for years. And today, it yields an incredibly precocious complaint of 6.1%. That's much than 5 times higher than the S&P 500 average of 1.1%. In presumption of currency flow, that translates into $500 much successful yearly dividend income, connected a $10,000 investment, by going with the baccy giant.

But erstwhile a output is that high, it begs the question of whether oregon not it is safe. While Altria's banal has been rising of late, it should arguably beryllium rising adjacent higher fixed its charismatic yield. Are investors overlooking a tremendously large dividend banal here, oregon is determination a valid crushed for avoiding Altria?

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What you mightiness find astonishing is that, arsenic precocious arsenic Altria's output whitethorn look close now, it's really low compared to what it has averaged implicit the past decade. There person been times wherever its output was good implicit 7% and adjacent into double-digits. The output tin alteration rapidly arsenic a effect of the stock price, but for the astir part, this has been a reasonably high-yielding banal implicit the past 10 years.

Altria has besides been raising its dividend for decades, providing investors with a tremendous inducement to bargain and hold. And the institution inactive anticipates much single-digit dividend maturation successful the years ahead.

While Altria's dividend has been reliable for decades, I would steer wide of the concern fixed the risks it contains. Tobacco rates person been declining for years, and there's plentifulness of uncertainty astir wherever the company's aboriginal maturation volition travel from. Even though the dividend whitethorn look to beryllium sustainable today, it's questionable whether that volition beryllium the lawsuit implicit the agelong term. Last year, the institution generated $20.1 cardinal successful revenue, nett of excise taxes, which was a diminution of astir 2% from the erstwhile year. Growth has been hard to travel by for Altria, and that's not apt to alteration anytime soon.

There are galore different high-yielding dividend stocks available, and Altria simply doesn't look to beryllium worthy the risk. Its payout ratio is astir 100% and if the institution needs to nonstop much currency toward maturation initiatives, the dividend whitethorn extremity up being a indispensable casualty.

Over the past 10 years, Altria's full returns (which see dividends) person been astir 120% -- good abbreviated of the S&P 500's gains of much than 310% implicit that stretch. If you put purely for the dividend, you could beryllium missing retired connected greater gains.