Key Points
Altria Group, one of the highest-yielding S&P 500 stocks, is also a Dividend King.
A $10,000 investment in Altria generates around $568.32 in dividend income, a yield of around 5.7%.
As smokeless tobacco and nicotine pouch sales, alongside cigarette price increases, help to drive continued mid-single-digit earnings growth, Altria could maintain its Dividend King status.
Altria Group (NYSE: MO), parent company of Marlboro maker Philip Morris USA, has one of the highest forward yields among stocks in the S&P 500 (SNPINDEX: ^GSPC). It has also raised its quarterly dividend annually for 57 consecutive years, placing it among the Dividend Kings, stocks with at least 50 years of consecutive dividend growth.
While this company's days of high growth are behind it, a path remains for the stock to sustain and keep on slightly growing its quarterly payouts in the years ahead. Dividend investors should still consider it a buy.
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What a $10,000 investment in Altria can generate in annual dividend income
With Altria trading for around $78 per share, a $10,000 investment in the stock equates to around a 128-share position. Altria pays a $1.11-per-share quarterly dividend. Annualized, that comes out to $4.44 per share. Multiply that by 128 shares, and you get $568.32 in annual dividend income, giving it a 5.7% annual dividend yield. That's over 5 times the annual dividend yield of the S&P 500, which currently stands at around 1.1%.
Altria most recently declared a dividend increase in August, raising the quarterly payout by 4.7%. This is in line with management's current dividend growth policy, which targets "mid-single-digit dividend per share growth annually."
Why Altria stands to sustain its dividend stalwart status
Yes, Altria's 88.5% payout ratio looks very high. However, with rising cigarette prices and growing sales of "smokeless" products, the company's dividend policy appears sustainable.
Altria recently raised its full-year earnings growth guidance to between 4.5% and 6%, bolstering confidence that the company can both maintain its dividend and keep raising it at a modest pace in the years ahead.
"Going smokeless" remains a greater challenge for Altria than the success competitors like Philip Morris International have had in this area, but as sales of its smokeless products continue to help augment overall growth, the stock appears well positioned to maintain its status as both a high-yield dividend stock and a Dividend King.
Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.