Altria has a huge dividend yield, but long-term investors need to look past the alluring yield and focus on the business.
It is very easy to lose sight of the most important details when there’s one detail that stands out in a huge way. For example, the income you could generate by adding ultra-high-yield Altria(MO -1.40%) to your portfolio is very alluring, given its incredibly high 9% dividend yield. But for long-term income investors trying to live off the cash their portfolios generate, buying Altria for its yield could end up being a bad decision. Here’s why.
Altria is giving investors what they want
To put it simply, the biggest reason to like Altria today is its huge 9% dividend yield. The dividend has been increased for years, so management clearly understands that its shareholders want income. In fact, the entire business model is currently geared toward paying that dividend. That’s a big problem if your holding period is measured in decades.
Image source: Getty Images.
While that yield may get you to look at the stock, you have to look past the yield before deciding to buy it. This all boils down to a look at Altria’s business. Altria effectively owns the U.S. rights to Philip Morris cigarettes. Several years ago, Altria split off its foreign business as a stand-alone company known as Philip Morris International(PM -0.99%).
Cigarette volumes have been on a steady decline in the United States for a long time. To offset those declines, Altria has focused on increasing cigarette prices so it can continue to pay out a growing dividend. That has worked out well so far, which may be giving a false sense of security to income investors enamored of the 9% yield on offer here. From a business perspective, at some point, price increases are likely to exacerbate the volume decline issue.
And that time could be fast approaching when you consider how far volumes have dropped over the past five years. To put a number on that, in 2018 Altria produced 109.8 billion cigarettes. In 2023 that number had fallen to 76.3 billion, a roughly 30% change in the wrong direction. In fact, Altria warned for the first time in 2023 that illicit e-vapor products, which are generally cheaper than buying cigarettes, are an increasing competitive threat. Basically, product cost looks like it is a big problem for cigarettes.
Would you buy Coca-Cola(KO -0.89%) if its volumes had declined 30% in five years while it was sharply jacking up its drink prices? Probably not, because you would likely question whether or not management’s aggressive pricing decisions were exacerbating the company’s pain.
Altria has tried and failed and is trying again
Here’s the thing: The volume decline isn’t the only problem at Altria today. In fact, the company knows full well it has to do something or its business will eventually wither away. That’s why it was an early investor in the vape space, putting money into industry pioneer Juul. It also jumped aboard the marijuana train, buying a massive stake in a grower as the industry started to take off.
Both of those investments turned into billion-dollar black holes for investors, with Altria exiting them and taking massive write-downs. In other words, the company tried to find a new avenue for growth and failed. So not only do investors have to worry about the decline of the cigarette business, but also the company’s execution in any other business it tries to enter.
On that front, the company recently bought NJOY, another maker of vape products. To be fair, NJOY is further along in its business development than Juul was. So there’s a reason to believe that this vape investment will work out better than the last one. But even if it does turn out to be a relative success, beating the Juul investment is not a high bar. NJOY is also so small relative to the cigarette business (which makes up around 88% of Altria’s top line) that it will, at best, offset only a portion of the ongoing decline over the near term.
Don’t get distracted by the dividend yield
It is entirely possible that Altria will manage to find a replacement business for its declining cigarette operation and sustain its massive dividend. But at this point, the path to that outcome is cloudy at best. Given the ongoing volume declines in cigarettes and multiple failed attempts in developing new business ventures, investors need to tread very carefully when looking at Altria today. That 9% dividend yield comes with a huge amount of risk.
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
Losing a loved one is never easy, and the legal steps that follow can add even more stress to an already difficult time.
For years, families in Vancouver (and Canada in general) have struggled with a complex probate process—filled with paperwork and legal challenges.
Thankfully, recent changes to Canada’s probate laws aim to make this process simpler and easier to navigate.
Let’s unearth how these updates can simplify the process for you and your family.
What is probate?
Probate might sound complicated, but it’s simply the legal process of settling someone’s estate after death.
Here’s how it works.
Validating the will. The court checks if the will is legal and valid.
Appointing an executor. If named in the will, the executor manages the estate. If not, the court appoints someone.
Settling debts and taxes. The executor (and you) pays debts and taxes before anything can be given.
Distributing the estate. Once everything is settled, the executor distributes the remaining assets according to the will or legal rules.
Probate ensures everything is done by the book, giving you peace of mind during a difficult time.
Recent Changes in Canadian Probate Laws
Several updates to probate law in the country are making the process smoother for you and your family.
Here’s a closer look at the fundamental changes that are making a real difference.
1) Virtual witnessing of wills
Now permanent in many provinces, including British Columbia, wills can be signed and witnessed remotely through video calls.
Such a change makes estate planning more accessible, especially for those in remote areas or with limited mobility.
2) Simplified process for small estates
Smaller estates, like those under 25,000 CAD in BC, now have a faster, simplified probate process.
Fewer forms and legal steps mean less hassle for families handling modest estates.
3) Substantial compliance for wills
Courts can now approve wills with minor errors if they reflect the person’s true intentions.
This update prevents unnecessary legal challenges and ensures the deceased’s wishes are respected.
These changes help make probate less stressful and more efficient for you and other families across Canada.
The Probate Process and You: The Role of a Probate Lawyer
(Image: Freepik.com)
Working with a probate lawyer in Vancouver can significantly simplify the probate process, especially given the city’s complex legal landscape.
Here’s how they can help.
Navigating the legal process
Probate lawyers ensure all legal steps are followed, preventing costly mistakes and ensuring the estate is managed properly.
Handling paperwork and deadlines
They manage all the paperwork and court deadlines, taking the burden off of you during this difficult time.
Resolving disputes
If conflicts arise, probate lawyers resolve them, avoiding legal battles.
Providing you peace of mind
With a probate lawyer’s expertise, you can trust that the estate is being handled efficiently and according to the law.
With a skilled probate lawyer, you can ensure the entire process is smooth and stress-free.
Why These Changes Matter
The updates to probate law make a big difference for Canadian families. Here’s why.
Less stress for you. Simplified processes mean you can focus on grieving, not paperwork.
Faster estate settlements. Estates are settled more quickly, so beneficiaries don’t face long delays.
Fewer disputes. Courts can now honor will with minor errors, reducing family conflicts.
Accessible for everyone. Virtual witnessing and easier rules for small estates make probate more accessible for everyone, no matter where you live.
With these changes, probate becomes smoother and more manageable for you and your family.
How to Prepare for the Probate Process
Even with the recent changes, being prepared makes probate smoother. Here are a few steps to help you prepare.
Create a will. Ensure a valid will is in place to avoid complications.
Choose an executor. Pick someone responsible for managing the estate and discuss their role with them.
Organize documents. Keep key financial and legal documents in one place for easy access.
Talk to your family. Have open conversations with your family to prevent future misunderstandings.
Get legal advice. Consult with a probate lawyer to ensure everything is legally sound and up-to-date.
These simple steps make the probate process easier for everyone involved.
Wrapping Up: Making Probate Easier in Vancouver
Recent updates in probate law are simplifying the process for families, from virtual witnessing to easier estate rules. These reforms are designed to ease the burden, helping you focus on what matters—grieving and respecting your dead loved ones’ final wishes.
Despite these changes, it’s best to consult a probate lawyer to ensure you can manage everything properly. Remember, they’re here to help you during this difficult time.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
