Altria Group, Inc. (MO) is strategically managing a challenging market environment by balancing its traditional tobacco business with an ambitious shift toward smoke-free alternatives. While the company is facing pressure in its core Smokeable Products segment due to weakened volumes, its ongoing efforts to embrace a smoke-free future show promise. Investments in brands like NJOY and on! reflect Altria’s forward-thinking strategy, which could drive long-term growth. However, the rise of illegal disposable e ...

Core Insights - Altria and British American Tobacco offer attractive yields of 7.4% and 7.7% respectively, significantly higher than the S&P 500's 1.2% and the average consumer staples yield of 2.7% [1] - Both companies face a long-term decline in cigarette volumes, with Altria experiencing a more severe decline compared to British American Tobacco [2][4] Volume Trends - Altria's cigarette volume declined by 9.7% in 2022, 9.9% in 2023, and is projected to decline by 10.2% in 2024, indicating a worsening trend [3] - British American Tobacco's volume declined by 5.1% in 2022, 5.3% in 2023, and 5% in 2024, with the latter two figures excluding the impact of the sale of its Russian and Belarus businesses [4] Business Strategies - Both companies have responded to declining volumes by raising prices, which has allowed them to maintain and even grow dividends despite losing customers [5] - British American Tobacco's global diversification has helped mitigate the impact of volume declines, but it has acknowledged significant challenges in the U.S. market [6] Future Outlook - The tobacco industry faces a bleak future unless new growth platforms are identified to replace declining cigarette operations [7] - Both companies are exploring new business opportunities, such as vaping and pouches, to address the challenges posed by declining cigarette sales [8] Investment Considerations - For short-term income investors, British American Tobacco may be the preferred choice due to its higher yield and better volume performance [9] - Long-term investors may find both companies lacking in fundamental strength to justify investment in the tobacco sector [9]

Core Viewpoint - The market has reacted negatively to recent tariff news and economic data indicating a slowing consumer, yet companies like Coca-Cola, Philip Morris, and Johnson & Johnson have shown resilience and strength in their stock performance during this period [1][18]. Coca-Cola (KO) - Coca-Cola exceeded consensus EPS and sales expectations with growth rates of 12% and 6% respectively, and its gross margin has improved from early 2023 lows [4]. - The company gained market share in the nonalcoholic ready-to-drink beverage sector in North America, with an impressive 11% increase in overall price/mix during FY24 [7]. - Coca-Cola has a 4% five-year annualized dividend growth rate, reinforcing its status as a Dividend King [8]. Philip Morris (PM) - Philip Morris reported a 14% growth in EPS and a 7% increase in sales, with strong demand for its products and a focus on innovation [10]. - The company’s smoke-free products surpassed 40 billion units for the first time in FY24, with net revenues for its Smoke-free Business increasing by 14.2% [11]. - PM has a market-beating annual dividend yield of 3.5% and is expected to see an 8.9% year-over-year earnings growth in FY25 [12]. Johnson & Johnson (JNJ) - Johnson & Johnson shares have shown modest growth of 5% over the past three years, compared to the S&P 500's 46% gain, but the stock's stability is a key takeaway [13]. - The company is also a Dividend King, with a 3.0% annual yield and a 5.5% five-year annualized dividend growth rate [15]. - JNJ's strong cash-generating capabilities and consistent pipeline have positioned its shares favorably, leading to a positive post-earnings movement [17].

Financial Data and Key Metrics Changes - Revenue increased 13% to $93.7 million for Q4 2024, and full-year sales were up 11% to $360.7 million [6][25] - Adjusted EBITDA for Q4 increased 5% to $26.2 million, while full-year adjusted EBITDA rose 12% to $104.5 million [7][27] - Gross margin for the full year decreased by 39 basis points to 55.9%, and for Q4, it was 56%, down 108 basis points year over year [25][27] Business Line Data and Key Metrics Changes - Zig Zag sales increased 7% year over year to $192.4 million, with Q4 sales up 2% to $45.9 million [27][28] - Stoker's net sales increased 16% year over year to $168.3 million, with Q4 sales up 26% to $47.8 million [28] - Modern oral revenue included a 419% increase in Free sales to approximately $6.3 million for Q4, reflecting strong growth [14][32] Market Data and Key Metrics Changes - Nearly 75% of Americans now live in states with legal regulated cannabis, expanding the total addressable market (TAM) for related products [12] - Stoker's MST volume was up 10 basis points despite a category volume decline of 6.4%, with market share growing by 50 basis points year over year to 7.6% [29][30] Company Strategy and Development Direction - The company is focusing on growth opportunities in its core business after divesting the CDS segment, which is now classified as discontinued operations [4][6] - The goal is to achieve a 10% market share in the modern oral category, with significant investments planned for sales and marketing [8][34] - The company aims to leverage cross-selling opportunities between its modern oral products and Zig Zag portfolio [11][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth momentum across the organization and initiated 2025 adjusted EBITDA guidance of $108 million to $113 million [8][34] - The company is confident in the performance of its modern oral brands, particularly Free and Out, and plans to expand distribution and marketing efforts [19][20] Other Important Information - The company ended the quarter with over $46 million in cash and reported free cash flow of $56.3 million for the year [32] - Capital expenditures for 2024 were $4.6 million, with a budgeted range of $4 to $5 million for 2025 [36] Q&A Session Summary Question: Outlook for modern oral products in national convenience store chains - Management is in discussions with partners and has rolled out a regional partnership with 7-Eleven, showing early positive results [40][43] Question: Growth and distribution opportunities for Stoker's MST - Management believes there are synergies between MST and modern oral products, presenting opportunities for cross-selling [45][47] Question: Drivers of guidance for modern oral products - Guidance is based on expected growth for Free and early reorder rates, with both Free and Out seen as synergistic [50][52] Question: Contribution margin and manufacturing considerations - Gross profit margins for modern oral are in the mid-thirties, with plans to reinvest profits into sales and marketing [56][58] Question: Regulatory environment regarding nicotine products - Management views recent regulatory actions as positive and is not currently concerned about nicotine strength regulations [62][64] Question: Direct-to-consumer opportunities in the nicotine patch category - Management sees a strong online opportunity for Out, while Free will focus on brick-and-mortar channels [65][67] Question: Marketing strategies for Free and Out - The company plans to leverage both online and brick-and-mortar strategies to maximize reach across its brand portfolio [71][73] Question: Zig Zag's growth and margin profile - Zig Zag is expected to see single-digit growth, with a mix shift into lower-margin products anticipated to continue [75][78]

When it comes to dividend investing, some are adamant that dividends don't matter but are just the removal of value from the company's share price. Instead, they think that selling shares to create your own synthetic dividendContributing analyst to the iREIT+Hoya Capital investment group. The Dividend Collectuh is not a registered investment professional nor financial advisor and these articles should not be taken as financial advice. This is for educational purposes only and I encourage everyone to do thei ...

Altria (MO 1.40%) isn't a household name in the consumer staples sector, but its main brand is probably one you know. Indeed, its Marlboro cigarette brand has a nearly 42% share of the U.S. cigarette market. Add in a 7.3% yield backed by a growing dividend, and you can see why investors would be attracted to Altria's shares. Could a $10,000 investment help get you to millionaire status? Maybe, but you need to balance the reward against the risk before jumping in.What does Altria do?Altria is a consumer stap ...

Company Overview - Altria is a consumer staples company primarily focused on cigarette production, which is distinct from other consumer staples companies that produce essential goods like food and toiletries [1][2] - The company has a high dividend yield of 7.4%, attracting dividend-focused investors [1] Market Dynamics - Cigarettes are not considered a necessity, but their addictive nature leads to consistent demand, even during economic downturns [2] - Historical data shows that during the pandemic in 2020, cigarette volumes only declined by 0.4%, but subsequent years have seen significant volume declines [3][5] Volume Decline - Altria's cigarette volumes have experienced a troubling trend: a 7.5% decline in 2021, 9.7% in 2022, 9.9% in 2023, and a projected 10.2% drop in 2024 [5] - The ongoing decline in cigarette volume poses a significant risk to the company's financial health and dividend sustainability [6] Pricing Strategy - The company has been offsetting volume declines through price increases, which has allowed it to maintain and increase its dividend [6] - However, there are concerns that continued price hikes may exacerbate volume declines in the long run [6] Strategic Challenges - Altria has attempted to diversify its business beyond cigarettes, investing in vaping and marijuana, but these efforts have not yielded successful outcomes [7] - The company's latest investment in NJOY is facing legal challenges, further complicating its growth strategy [7] Investment Considerations - Altria is struggling with its core cigarette business and has not effectively transitioned to new growth platforms, making it a risky investment for dividend-focused investors [8]

Regimes are changing in the market, and this could mean a few things, but today, it means that volatility is back. Whenever these shifts come, specifically to the S&P 500 index, investors tend to decrease their exposure to riskier stocks to look for more defensive names in the market to cushion some of the risks that come with these volatility spikes. This is where names in the consumer staples sector usually come into play. These stable and predictable business models and product lines usually carry low be ...