Mo Sabmiller Pic
Altria has a big stake in SABMiller. Image source: SABMiller.

A lot has been going on with Altria Group (NYSE:MO) lately, with its tobacco business temporarily yielding the limelight to the company's stake in beer giant SABMiller. With Anheuser-Busch InBev (NYSE:BUD) and SABMiller having agreed in principle in late October to a deal worth more than $100 billion, the ramifications for Altria and its 27% stake in SABMiller are huge. Nevertheless, Altria executives spoke more about the company's core businesses than about the deal in their discussions with investors following its quarterly financial report. Let's look more closely at what Altria said and what it means for shareholders going forward.

"Altria reported equity earnings from our SABMiller investment of $187 million in the third quarter and $546 million for the year to date."-- CFO Billy Gifford

The Anheuser-Busch InBev proposal for SABMiller has caused many Altria investors to look closely at just how much money Altria makes from its position. The beer business brings in only a small fraction of Altria's overall operating profit, but the benefit that SABMiller provides is in giving shareholders exposure to a business that's truly independent from tobacco. The diversification advantage that Altria gets from this is huge, and one reason why so many are concerned about the structuring of an SABMiller-Anheuser-Busch InBev deal is in ensuring that Altria will still have exposure to the global beer business going forward.

"Our focus is on premium. 90% of shipments for [Philip Morris USA] are premium. But L&M has a role to play, and what it does is it competes nicely in the discount space without growing it."-- CEO Marty Barrington

Altria has had great success with its L&M line of discount cigarettes, which in some cases has been growing faster than the key Marlboro brand. Yet Barrington is convinced that the overall cigarette market is headed toward more premium products, and so it sees L&M's role as taking away share from other discount players while still allowing Marlboro to grow its potential market and increase market share. That's a good strategy for now, especially as falling gasoline prices have put many customers in a position where they can afford to move up to Marlboro if they choose.

"Nu Mark continues pursuing disciplined innovation in e-vapor. We've seen encouraging trials on MarkTen XL, allowing us to expand our lead market presence."-- Barrington

Altria has high expectations in pursuing opportunities outside traditional cigarettes, with a big push toward innovative products. The MarkTen line has been Altria's answer to competing vapor products from other producers, but Altria has also moved forward with its Green Smoke brand as well. Barrington realizes that the market is in an experimental phase right now, and it wants to figure out the best product to meet consumer demand and satisfy its current and potential customers.

"We raised our quarterly dividend by 8.7% in August to an annualized rate of $2.26 per share, marking our 49th dividend increase in 46 years." -- Barrington

Above all else, Altria has a strong reputation for providing solid dividend income. Throughout its history, the stock's dividend yield has often been above its current level of 3.75%, yet Altria has overcome many of the risks that justified a premium income yield. With the company continuing to target paying back about 80% of adjusted earnings per share in the form of dividends, Altria has remained committed to its shareholders and their desire for steady and reliable income.

"We believe that combining the largely complementary businesses of SAB and AB InBev to create the world's largest brewer is a compelling opportunity. So we're excited about the proposed transaction and are working constructive with the parties to complete the transaction." -- Barrington

Many investors feared that an all-cash deal for SABMiller would effectively force Altria to take a large capital gain and exit the beer business entirely. Yet the alternative compensation gives Altria the chance to take a major stake in Anheuser-Busch InBev, and that in turn could give Altria even greater prospects for long-term growth and profit from the beer industry. Rather than blocking a deal, Altria has been willing to worth with AB InBev, and if a deal goes forward, it seems likely that the tobacco giant will be working closely with the beer leader in the future.

Altria has done extremely well and continues to hold substantial promise for investors. Even with some attention put on SABMiller, Altria's core businesses add up to a solid investment opportunity for investors of all kinds to consider.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.