Better Buy: Altria vs. Prospect Capital

In today's ­first-round match-up of The Motley Fool Better Buy Tournament, Altria  (NYSE: MO  )  squares off against Prospect Capital  (NASDAQ: PSEC  )  in a battle to determine which stock is the better buy now. The 64-company tournament pits two Motley Fool analysts against each other as they make the case for their stocks, with the winner determined by you, the readers.

It's no secret that Altria commands nearly 50% of the U.S. cigarette market. After all, the company does two things very well: It sells many of the leading cigarette brands, including the iconic Marlboro, and it makes boatloads of cash that it returns to investors in the form of dividends and share repurchases. With Altria sporting a yield north of 5% and a reasonable valuation based on historical standards, Motley Fool analyst Michael Finarelli believes the stock deserves a spot in your portfolio.

Motley Fool Financials analyst David Hanson believes Prospect Capital should move on to the next round because of the company's largest investment portfolio, which has excellent credit quality. Prospect Capital's BDC structure allows it to pass earnings through to shareholders, which results in a big dividend yield. Finally, David sees the company's large size and scale as a big advantage when it comes to finding new investments and getting favorable prices. 

Watch these analysts square off in the video below and then vote for a winner. Then check out the other companies in the Motley Fool Better Buy Bracket

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Cast your vote in the poll below the video!

Read/Post Comments (3) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On March 19, 2014, at 12:24 PM, jaybird43 wrote:

    This is a tough one to vote on. I own both. I consider Mo a long term hold. Psec is probably going to last as long as rates are low. An even harder bracket would have been MO versus MAIN. I like MAIN's internal management and underwriting.

  • Report this Comment On March 19, 2014, at 1:31 PM, jj27713 wrote:

    I own them both. Good for both ends of the income spectrum. Why pick just one?

  • Report this Comment On March 20, 2014, at 1:58 PM, BrianSanders wrote:

    Don't see why MO is so attractive, 97% to shareholders...great use of cash lol.

    I like PSEC better in terms of valuation, high ROE and small discount to book. Technicals are turning slightly bearish, but I think it's a buy over Altria especially with long term slow(ing) growth.

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Michael Finarelli

Motley Fool Consumer Goods analyst, Mike Finarelli is a formerly devout value investor who now believes that value is in the eye of the beholder and paying closer to fair price for exceptional businesses with wide moats trumps all.

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Related Tickers

8/28/2015 4:02 PM
MO $54.17 Up +0.46 +0.86%
Altria Group, Inc. CAPS Rating: ****
PSEC $7.71 Up +0.21 +2.80%
Prospect Capital C… CAPS Rating: ****