Altria (NYSE: MO), the largest tobacco company in America, might not seem like a reliable long-term investment.
It owns Marlboro, the top cigarette brand in the country, but adult smoking rates in the U.S. have steadily declined over the past six decades
It also spun off its higher-growth overseas business as Philip Morris International (NYSE: PM) in 2008. Yet over the past five years, Altria’s stock has still rallied 56% and generated a total return of 129% after reinvesting dividends. It’s also raised its dividend 60 times over the past 56 years, making it a Dividend King that has hiked its payout for at least 50 consecutive years.
It pays a forward dividend yield of 5.8%, compared to the 10-Year Treasury’s 4.6% yield, and it spent only 81% of its free cash flow (FCF) on dividends over the past 12 months. Let me explain why those dividends are sustainable, why its core business is still growing, and why it’s a great income stock to buy this month as some investors shun stocks during the slow summer months. Why is Altria’s business sustainable?