This year has not been kind to dividend investors with stock positions in Altria (MO) as recent merger plans have strengthened competition, and small earnings misses have seemingly confirmed the validity of this negative sentiment. But recent analyst speculation has raised the possibility of a 9% dividend increase on Aug. 24th, and it is now clear that the positive upsurge that a move like this would create has not been fully priced into the market. At this stage, it is not clear that this is a possibility that has been priced in at all, and so the stock’s elevated yields and depressed market valuations should be combined with a positive macro outlook to create a strong argument for long positions in Altria. We have bought the stock at current levels (with a stop loss below $61.70) in anticipation of the coming rally to new highs above $77.30 heading into next year.
Our dividend strategies typically look for undervalued stocks that offer stable yield and the potential for capital gains within the next 12 months. When we look at recent activity in MO, all of these criteria are met as markets have become predominantly focused on the FDA’s changing stance on nicotine products and the company’s minor earnings miss that was posted last month.
