This is my latest piece on multi-baggers. Altria Group, also referred to as Philip Morris, has been one of best performing stock ever in the last 100 years. Tobacco itself was the best performing industry from 1900 to 2000. It wasn’t oil, technology, or IT. No it was tobacco. Here’s an industry that didn’t require any innovation or massive technology breakthrough. It’s just tobacco and it has crushed any other industry. Thanks in part to its addictive nature.
Shares of Philip Morris were publicly available from 1919 but data is hard to come by. Most public website, such as Yahoo! Finance, has data going back to the 1970s. I spoke with investor relations but they couldn’t help either. So I had to calculate my performance from 1970. That’s reasonable holding period. It also represent a working lifetime.
The cost of one share on November 23, 1970 would have been $46.12. Since then there have been many splits. My one share would have turned into 96 shares. There was a 2 for 1 split in 1974, 1979, and 1986, a 4 for 1 split in 1989, a 3 for 1 split in 1997.
It’s possible there were splits before the 1970s but the data are extremely difficult to come by. My single $46.12 share would have turned into 96 shares worth $6,145.92. This represents a 57466% change, or a 574.6-bagger in Peter Lynch’s parlance. A $1,000 investment (2081.30 shares split adjusted) would have been worth $575,666.84. The yearly dividend payment would have been 5,077$, five time my original investment. Investing in Atria may not have been the most ethical choice but it would have been a financially sound decision, and more.
The full article is on Seeking Alpha and is free to read. They have the rights to it so I can’t post the full piece. One of the best part are the comments. I love reading stories on how certain people have been holding to certain shares for more than 30 years and saw their investment compounded many fold. One commentator said that his shares of Altria has been in the family for almost 100 years!
Today Altria Group is a $122b market cap company with approximately $19b in revenues. The cigarette manufacturer distributes annualized dividend of $2.44 per share that provides a yield of 3.9%. The Altria Group owns 100% of Philip Morris USA, John Middleton (machine-made cigars), Philip Morris Capital Corporation (leveraged leases), U.S. Smokeless Tobacco Company, and the Ste. Michelle Wine Estates. Altria also owns 9.6% of Anheuser-Busch InBev. It’s a pretty diversified group but it’s mostly known for its cigarettes and its Marlboro brand.
I bring up the dividends early on because it has been such an important contributor to its performance. Altria has increased its dividend 51 times in 48 years. Altria targets a dividend payout ratio of approximately 80% of adjusted earnings per share. The dividends have turned Altria into a dominant investment. It has been a favorite of dividend investors for a long time, as the company has consistently made healthy payouts to its shareholders. The company has provided the killer combo: the income they need and the capital appreciation they want.
Continues here Seeking Alpha