Thursday, 30 January 2014

Altria - (rudely) on sale

Back in October, in a posting about Altria - the largest cigarette company in the US and with brands such as Marlboro in its stable - I asked:

'Is Altria more than just a yield stock?  You can see the attractions of holding this view (in a chart the company presented last month):'

What were the key quotes out of today's Q4/FY presentation beyond the 44th successive year of a dividend increase (+9%) and slightly higher market shares for Marlboro?  All with my emphasis added. 

On growth -
'Altria’s 2013 full-year adjusted diluted EPS, which excludes the impact of special items, grew 7.7% to $2.38...Altria forecasts its 2014 full-year reported diluted EPS to be in the range of $2.51 to $2.58, and 2014 full-year adjusted diluted EPS to be in the range of $2.52 to $2.59, representing a growth rate of 6% to 9% from an adjusted diluted EPS base of $2.38 in 2013'.

Shareholder remuneration #1 -
'Altria expects to continue to return a large amount of cash to shareholders in the form of dividends by maintaining a dividend payout ratio target of approximately 80% of its adjusted diluted EPS'.

Shareholder remuneration #2 -
'During the fourth quarter of 2013, Altria repurchased approximately 6.8 million shares of its common stock at an average price of $37.29 for a total cost of approximately $252 million. During the full year, Altria repurchased 16.7 million shares at an average price of $36.05 for a total cost of approximately $600 million'.

Capex -
'we plan to make disciplined and incremental investments to build our e-vapor business'
I noted back in October that the Altria core business (ex the value of the SABMiller stake) was valued in the x7s EV/ebit.  Given the combination of characteristics above (yield, some growth, rising market shares, commitment to shareholder remuneration, some effort to grow in new related markets such as e-cigarettes) that feels good value.  And the reaction of Mr Market to all this?  The share pushed down closer to a sub US$35 price.  Feels a bit rude. 
Value for income and capital growth seekers alike. 

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