Up with smoke

You want cheap? How about Marlboro cigarette maker Altria Group (NYSE: MO), with its stock recently down more than 47% from a 2017 peak? A falling stock price will increase a stock’s dividend yield, and Altria’s payout was recently yielding a whopping 8.3%.

If you don’t mind profiting from tobacco (or cannabis or alcohol), Altria offers a generous income stream that’s likely to be increased over time.

The tobacco industry is facing more challenges than ever and isn’t the growth industry it once was, but tobacco giants like Altria still have ways to reward their shareholders.

Increasing the price of tobacco products is unlikely to make smokers reduce their consumption. This gives tobacco companies considerable pricing power. Indeed, a government index of the price of tobacco and smoking products more than tripled from 2000 through late 2020. That’s an average annual inflation rate of roughly 6%.

Meanwhile, Altria is exploring ways to broaden its appeal with smokeless products; for instance, it’s introducing the IQOS heated tobacco system into some U.S. markets. It also invested $1.8 billion in licensed Canadian cannabis producer Cronos Group in 2018. Although the Canadian marijuana industry has been struggling under the weight of regulatory issues and company-specific miscues, it’s expected that Altria will eventually aid Cronos in developing and marketing cannabis vape products.