Altria (MO 1.83%) pays one of the most generous dividends on the stock market today. The tobacco giant has sent $32 billion to shareholders through these payments over the past five years, in fact, even as it spent aggressively on stock repurchases.
The dividend yield on the stock is extremely high, partly because the company commits to sending a large portion of annual earnings back to investors each year. But how much of an investment would it take to secure $500 of annual dividend income owning just Altria stock?
Getting to $500 a year
Altria shares yield just over 9% at today's prices. That means you'll need to own roughly $5,600 of the stock to achieve $500 of annual passive income. That investment would translate into roughly 128 shares of the business, each delivering $3.92 in yearly income.
NYSE: MO
Key Data Points
The news gets better from there: Altria has raised its dividend in each of the last 15 years, so there's a good chance that you'll have higher income in the coming years. The company's most recent raise was 4%.
Where the dividend comes from
The important thing to follow is where the funding for the dividend comes from. Altria isn't a quickly growing business after all, with sales rising just 4% in the past five years. Yet it is highly efficient and very profitable. The company routinely converts over 50% of sales into earnings each year, and it generates ample cash flow.
That profit margin in particular is far better than you'll see at even successful tech giants like Microsoft. As long as Altria can maintain that efficiency, you can expect to see Altria's dividend rise over the next several years.
At the most recent 4% rate, for context, you'd see the dividend double roughly every 18 years. In other words, your $500 of annual income might just be the start.
