As NJOY Powers Altria's Growth, Is It Time to Buy the Stock?

Core Viewpoint - Altria Group is attracting investors with a forward dividend yield of 7.5% and has consistently increased its dividend since 2009, despite facing challenges in revenue growth [1][6] Group 1: Financial Performance - Altria's Q3 results were significantly driven by its NJOY business, with consumable shipments increasing by 15.6% to 10.4 million units and device shipments more than doubling to 1.1 million units, gaining 2.8 points of U.S. market share to reach 6.2% [3] - The cigarette business continues to decline, with overall shipment volumes down 8.6%, including a 7.5% drop in Marlboro brand shipments and a 28.4% plunge in discount brand shipments [4] - Revenue net of excise taxes rose 1.3% to $5.34 billion, slightly exceeding analyst estimates, with adjusted EPS increasing by 7.8% to $1.38, surpassing the expected $1.35 [5] Group 2: Dividend and Cash Flow - Altria increased its dividend by 4.1% to an annual rate of $4.08, generating $5.4 billion in operating cash flow and $5.3 billion in free cash flow in the first nine months of the year, while paying out $5.1 billion in dividends [6] - The dividend coverage ratio has tightened, currently just over 1 times, down from over 1.2 times at the end of 2022, indicating a narrowing margin for covering the dividend with free cash flow [9][12] Group 3: Share Buybacks and Debt - The company repurchased 13.5 million shares for $680 million during the quarter, ending with net debt of $23.3 billion [7] - Altria maintains a debt-to-EBITDA leverage ratio of 2.1 times, indicating a manageable level of debt relative to earnings [9] Group 4: Valuation - Altria trades at a forward price-to-earnings (P/E) ratio of 10, which is significantly lower than its former international unit, Philip Morris International, which has a P/E ratio of 18.22 [10][11]