Image Source: PexelsAltria Group (MO) — formerly Philip Morris — is one of the world’s largest producers and marketers of cigarettes and other tobacco products. However, the company’s current motto is “Moving Beyond Smoking” as it pushes smoke-free products and harm reduction.
Regardless of your stance on tobacco stocks, Altria Group (MO) still does more than $20 billion in annual revenues and has a market cap of just under $90 billion. As shown below, the stock has also been trending steadily higher for the last six months.
While Altria has seen share-price appreciation over the last six months, it is most known for its high-dividend yield. MO currently has a dividend yield of more than 7.5%, which makes it the second-highest-yielding stock in the S&P 500 behind Walgreens (WBA). According to Insider Monkey, Altria has increased its dividend for 54 consecutive years, making it one of the longest-running Dividend Aristocrats.
Hypothetically, had you invested $10,000 in Altria Group (MO) shares at the start of 1990, re-invested dividends, and held to today, your shares would currently be worth roughly $1,041,000. That’s a gain of more than 10,000%!
A huge chunk of those gains since 1990 have come from re-investing dividends. As shown below, MO shares are only up 1,549% (8.4% annualized) in price over this time frame compared to its total return of more than 10,000% (14.3% annualized). It will be tough to find a better example of the compounding effects of re-investing big dividend payments than MO. Using the Rule of 72, with no share price appreciation at all, MO’s annual dividend yield of 7.8% would double your money in just over 9 years.
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