One of the reasons why tobacco stocks had historically been successful long-term investments is because tobacco stocks were cheap, the dividend was high, the dividend increased over time, and these three factors interacted quite well for that that chose to reinvest in companies like the old Philip Morris. But when you look at where Altria is at right now, in terms of valuation, it is as if investors have discounted the incredible risks that come with the territory of investing in a highly regulated, declining industry.
At the time of this writing, Altria is trading at $54.19 per share. Some stock screeners show that the profits are $2.17, but if you read the balance sheet and exclude one-time accounting adjustments, it is more like $2.50 per share. That is the number I prefer to use because I am interested in long-term earnings power that will affect the valuation going forward. … Read the rest of this article!