MO Money: Why Is Altria Group (MO) Stock Surging?

MO stock (NYSE:MO) had a brief comeback last week, which was quickly snuffed out by Friday’s market selloff—the fourth consecutive selloff to new 2022 lows.

Nonetheless, with the cigarette company beating the S&P 500 by 10% year to date, the stock’s defensive quality is assisting investors in limiting their losses. The newly raised quarterly dividend distribution of $0.94 surely helps in this aspect.

More crucially, Altria seems to be finding progress in its drive to rebrand itself at a time when health and fitness trends are increasing and smoking is declining. It most definitely must be for the benefit of MO stock (NYSE:MO).

What is Altria’s Smoking Prevention Strategy?

Altria’s objective is to bring smokers to a “smoke-free world” by the end of the decade. It is the tobacco industry’s equivalent of switching from gas-powered to electric automobiles; it is a massive undertaking with many territories to cover.

Altria’s preferred strategy is to develop a range of smoke-free products. Rather than going tobacco-free (and addressing nicotine addiction), it is extending its range of smokeless tobacco (think: Skoal chewing tobacco), nicotine pouches under the On! brand, and the controversial IQOS heated tobacco. IQOS, the only FDA-approved heated tobacco technology, as well as its famous Marlboro HeatStick portfolio, has come under intense regulatory and health group criticism.

How Reliant on Cigarette Sales IIs MO Stock?

While this approach is implemented, Altria will continue to rely on its traditional cigarette industry. As opposed to the stress-filled pandemic time of 2021, current sales numbers are reduced, with fewer individuals resorting to cigarettes. On the bright side, MO stock (NYSE:MO) has pricing power, enabling it to raise carton prices to help offset the demand shortage.

Despite the company’s effort toward oral tobacco, the smoked products sector accounts for nearly 90% of sales. Smokeable revenue increased 2% in the second quarter due to price increases, and it controlled 48% of the retail market. Oral tobacco, Altria’s growth priority, saw revenues decrease by 4%.

A month later, the board of directors announced a 4.4% dividend raise, which pleased shareholders. This extended Altria’s dividend increase streak to 12 years and increased the future yield to about 9%. This has rekindled interest in MO stock (NYSE:MO) among income investors ready to wait out the long-term growth plan while collecting dividends.

Why Do Juul Developments Have an Impact on MO Stock?

MO stock (NYSE:MO) will continue to be influenced by Juul-related news shortly. The corporation owns 35% of the nation’s largest e-cigarette manufacturers. Juul is, therefore, an e-vapor extension of Altria’s smoke-free platform—one that has harmed its market value owing to the rising hazards linked with vaping.

Featured Image – Megapixl © Timonschneider

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About the author: Okoro Chinedu is a freelance writer specializing in health and finance, with a keen interest in cryptocurrency and blockchain technology. He has worked in content creation and digital journalism. Since 2019, he has written on various online platforms, and his work has been recognized by several important media sources and specialists in finance and crypto. In addition to writing, Chinedu enjoys reading, playing football, posing as a medical student, and traveling.