Bring out the Vice Stocks: Altria Group Inc. (MO)

Today's Financial News - Posted September 16, 2008

If you want to be among the few investors making money in this market, buy shares of Altria Group (NYSE:MO) and go stand by the mailbox. That sexy dividend check should arrive soon.

by Andrew Snyder

Baltimore (TFN): There’s a reason all those guys on Wall Street get paid big bucks. It’s a hard, stressful job filled with rollercoaster emotions. Imagine what’s going through the sweaty head of the guy standing in front of the Lehman Brothers trading desk.

Probably something like, “Good golly, I need a smoke.”

Or how about the guy representing AIG? He’s thinking, “What I wouldn’t do for a beer.”

When the closing bell rings on Wall Street today at four o’clock, the bars better be ready. The herd is stressed out, thirsty and ready to drink. And I bet more than one trader will be chain smoking a pack of Marlboro’s.

Pick your poison

We all have our vices. Why do you think stocks like McDonald’s and Coca-Cola are always top defensive picks? When the economy turns sour, we need our vices more than ever.

That’s why every investor needs to call his broker and buy shares of Altria Group (NYSE:MO), the company behind Marlboro cigarettes, Copenhagen chewing tobacco, many brands of fine wine, John Middleton cigars, and it even has a 28.6% voting stake in SABMiller, the owner of Miller brand beers.

The company is a vice-producing powerhouse. That means it’s a perfect investment when Wall Street flutters.

Now before you read further, you need to know this is not a stock with huge appreciation potential. It won’t be going up by triple-digit figures anytime soon.

But it won’t be headed in the other direction either…

That’s because it gives 75% of its earnings back to shareholders. That makes it a fantastic income play. Right now, the stock is paying an annual dividend of $1.28, or about 6% of your investment.

Few other investments can come close.

I can hear you now. “I thought fewer and fewer people are smoking.”

Fortunately, you’re right. In response, Altria has done an excellent job ensuring its business continues to grow. It recently purchased US Smokeless tobacco and bought a major stake in SABMiller. It also played a major role in deciding to downsize its manufacturing facilities and moved operations to Richmond, VA.

It wants to ensure continuing profits for years to come.

The value of a strong brand

Just because less folks are smoking doesn’t mean you should count out the company’s huge Marlboro brand. Cigarettes are still a hugely profitable business and Marlboro is an industry dominator. It controls over 40% of the U.S. market, more than the next ten competitors combined. That is absolutely huge brand power.

And it’s that incredible branding that allows it to send so much back to its shareholders each year in the form of dividends.

Right now is the best time to take advantage of this company’s quarterly payouts as the stock has been drug down by the Wall Street bears. Share price has only dropped a slight bit – less than a dollar over the past few days – but a penny saved is a penny earned. The slight downturn will quickly be erased, adding to your total gains.

With the market making wild gyrations, protection is the key. Your entire portfolio does not have to be in safe plays, but you should be adding to your safety buffers. Altria is the perfect option.

If you want to be one of the few investors making money in this market and getting a good night’s sleep, buy shares of Altria Group (NYSE:MO) and go stand by the mailbox. That sexy dividend check should arrive soon.

And while you’re at it… listen what Amberger has to say about “Vice Stocks” in general.