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Admit it: You either love Altria Group
Recession? What recession?
Predicting macroeconomic events is usually a waste of time, but one trend seems pretty clear these days: Consumer confidence will have at least one foot in the grave for quite a while. When the economy flatlines and everyone slams their wallets shut, consumer-based companies that provide anything less than the bare essentials get rocked. Look no further than Sears Holdings
And let's be honest, "holding your ground" is about all you can ask for these days. When the big argument surrounding the fate of the economy is whether we're in a depression or merely a recession, and the market is avoiding risk like the plague, you'd be wise to forget about the prospects of gangbusters growth and hang your hat on something a little more dependable: dividend yields, and their sustainability.
Altria's a champion in both areas. After spinning off Philip Morris International
But is it safe?
The big question is whether Altria can weather the economic storm well enough to keep that dividend going. After all, stocks like Citigroup
The good news is that Altria has not only paid, but raised its dividend every year in the last decade -- the only exception being lowered payouts resulting from spin-offs. It's tough to make apples-to-apples historical comparisons, since Altria has divested so many subsidiaries, but the bottom line is tough to refute: The cigarette industry is a virtually unshakable cash cow. Even if the company were to slash its dividend by a significant amount, you'd probably still come out with higher risk-adjusted returns than almost anywhere else in the market.
All of this dividend talk begs the question: Am I suggesting an 8.4% annual yield is really worth drooling over in a market littered with so many bargains? The answer is an unequivocal "yes." There's a good chance some big-name stocks could post multibagger returns next year, but there's also a chance the recent market meltdown is just the beginning. A few months back, I took a look at how low stocks fell in other historical periods of pain. I hate to say it, but it's quite a bit lower than we're at today. When you consider the uncertainty of markets today, compared to Altria's near stranglehold on the U.S. tobacco market, its history of uninterrupted payouts, and the prospect of being in a potentially "recession-proof" industry, a stable 8.4% dividend looks pretty darn attractive to me.
Our Motley Fool CAPS community agrees, tagging Altria with a perfect five-star rating. In fact, 97% of investors who've rated this stock tag it as an "outperform." To cast your own vote, or to see what more than 120,000 other investors are saying about Altria and thousands of other stocks, click here. It won't cost you a dime.
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Fool contributor Morgan Housel has never actually smoked a cigarette, but owns shares of both Altria and Philip Morris International. Kraft Foods and Bank of America are Motley Fool Income Investor picks. Sears Holdings is a Motley Fool Inside Value recommendation. The Motley Fool is investors writing for investors.