It's instructive to look back to see how a stock has performed. You can use that information to look ahead and think about the future return.
Altria Group (MO +1.60%) produces and sells tobacco products in the United States. It's a controversial business, but how have its shareholders fared over the last year if they invested $1,000?
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The calculation
Altria's stock price gained 6.9% over the past year through Dec. 10. That's half the S&P 500 index's 13.8%.
But that doesn't tell the whole story. You would have received dividends if you'd bought Altria's stock and if you'd invested passively in the S&P 500. You need to factor those in when calculating the total return.
NYSE: MO
Key Data Points
Thanks to Altria's high dividend payments, the shares produced a total return of 13.5%. However, that still lagged the S&P 500's 15.6%.
Your $1,000 investment in Altria's stock would've been worth $1,135 when including the price gain and dividend payments. That same amount invested in the S&P 500 index would've been worth $1,156, however.
Looking ahead
Altria Group may tempt investors who place a high importance on dividends. The board of directors has increased payouts annually for a number of years. Most recently, the company raised October's payout by 3.9% to $1.06 a share.
At the new rate, Altria's stock has a 7.2% dividend yield. That dwarfs the S&P 500's 1.1% yield.
However, the business has been weakening. Most of Altria's revenue comes from smokeable products, particularly cigarettes. The segment's top line fell 1.3% in the third quarter to $4.6 billion. Its cigarette volume continued falling, and its market share, particularly its core Marlboro brand, has been dropping.
With lower volume and lost market share, Altria's long-term business prospects don't look bright. Hence, I'd pass on the shares despite the dividend yield.
