Thursday, February 13, 2014

Stock Analysis February Edition

The tax man stopped by this month and left me with a little present.  What better to do with a gift then use it to create more smaller gifts every quarter for the rest of my life?  So with this new found capital I have decided to write up my likely stock buy for tomorrow.

Altria Group (MO) is the domestic (US) version of Phillip Morris (PM) (the international version), which provides consumers with tobacco and tobacco related products.  Some quick Altria facts:

  • Price to earnings ratio of 15.60 vs the industry average of 19.5
  • EPS of 2.26
  • Current Yield 5.44%
  • Increased dividend 47 times in the last 44 years
  • Diversified into the e-cig, smokeless tobacco and wine industries.  
I also speculate that Altria will be a strong play if the US ban on Menthol cigarettes occurs.  This will cause many traditional menthol smokers switch over to new tobacco products.  This move could be devastating to LO where menthol currently accounts for almost 90% of its profits.

But what about your morals!?

My personal stance is that we all own 100% of the shares which make up our body.  What we decide to do with those shares is our own choice.  I personally have many smokers in my immediate family and have lost members to relevant cancer related illnesses.  This does not change the fact that they are adults who don't need anyone to tell them what they can and cannot do.     

Other stocks I am currently considering for my upcoming buy: KMB, TGT, T

What are your favorite dividend stock picks right now?


  1. MO in general has been a solid play for years, however the overall decline in the United States marketplace is one to look into as a concern for traditional cigarettes. MO does have a strong position in the smokeless tobacco market, but is behind LO when it comes to e-cigarettes. Blu, LO's product has the largest share of the e-cigarette market and should maintain that position as it expands rapidly.

    As for a potential Menthol ban, I believe those concerns have been around for a few years, with nothing materializing. Given the amount of tax revenue generated by the sales of Menthol cigarettes and the strength of the lobbyists, I doubt the ban will occur. Cigarette smoking has been proven harmful for years, and all the major manufacturers survived the tremendous 90's government pursuit with little long-term consequences.

    1. W2R,

      I agree with you about the potential decline of tobacco sales however I personally believe that they will taper off to a more consistent population of smokers ( I dont think we will ever be smoke free although I wouldn't mind my investment declining if it were to happen). I also have a feeling that Altria is going to hit the ground hard in the E-Cig industry, recently aqcuiring E-Cig maker Green Smoke. I think that MO will give LO a run for its money on that front which may provide a little growth potential.

      The only reason I'm extra interested in a possible menthol ban is because of the recent move of the EU to ban menthol and renewed efforts by individual states like Hawaii (senate bill 2222) to ban all forms of flavored cigarettes (which typically only included chocolate/vanilla but now extends to menthol). Anyways, thank you so much for stopping in, I had feeling this would be a controversial pick but I ALWAYS appreciate discussion. Take care!

    2. Hi Dividendasaur,

      Thanks for your analysis. I did not know about MO. As mentionned last time, I am just starting my divident journey. I have read about PM but never about MO. I'll add it to my watchlist. By the way, how do you manage your watchlist ? Any website or system you would recommend. I am checking the stocks I am invested in with


    3. Guillaume,

      When looking for new stocks to consider for my watch list I usually turn to the US Dividend Champions excel spreadsheet found here It seems to be updated frequently and will provide you with quick info on the current dividend champions/contenders/challengers. Using this list I drill down and research the companies more in depth.

      I trade using TDAmeritrade which provides a pretty decent amount of research information. I will also use google finance, they are good about providing a large list of articles that let you read up on other peoples analysis for whatever company you are interested in. After I have conducted my analysis I keep a good old pad of paper/pencil on my desk and jot down notes on the companies that stand out to me the most at the time. Throughout the month I will revisit my watch list companies on my paper and re rank them until I reach my buy date, picking at that time my favorite stock.

      Take care and thank you for stopping in!

    4. Dividendasaur,

      Thanks for your detailled answer ! looks like very helpful.

      As of now, I buy stocks with Loyal3. I have just opened an account with Schwab and will use it for trading stocks not available on Loyal3. I am with Schwab since it was easy for me to open an account. Given that I am a newcomer in the US (came one year ago from Europe) and still non-resident, it is not always easy to open a bank account and at Schwab they were providing a lot of service useful to a non-US resident like me.

      I'll take a look at Google finance and follow the news about my target companies.

      I was not investing while living in Europe but decided to learn more about investing since I opened a 401k here in the US. After my readings, I decided to invest the small amount of money I save every month. Dividend investing seemed to me a perfect style of investing.

      Take care and keep the good job,

  2. Guillaume,

    One thing that you might want to consider if you are investing smaller amounts of capital at a time would be commission free ETFs. I personally pay $10 per trade on my stock purchases, and as such I don't like to invest in increments of less than $1000. I see that Schwab offers commission free ETFs here

    ETFs would definitely be something worth your time to research because depending on your monthly investment amount it could save you big in the long run.

    1. Hi Dividendasaur,

      Thanks for your answer. I'll take a look at free ETFs.

      So far, I am investing through Loyal3 to avoid the commission. They don't have a lot of stocks but some of them are interesting for dividend investors : TGT, MCD, WMT, PEP and Ko among others.

      In January, just by tuning a bit my budget, I was already able to save $400 instead of my usual $300. I am even hoping to reach $500 monthly saving in february. So, once done with Loyal3, I'll will probably invest every two months in order to not be beaten by the commissions.


  3. Loyal3 seems like a really interesting tool and I am going to have to take a closer look into it. I am extremely intrigued with the ability to buy stocks with a rewards credit card (of course paying it off each month) at a discount.