Altria: Relative Winner From U.S. Tobacco Tax Proposals; Now 8% Dividend Yield

(Preview) Company Update (MO US) (Buy)

Summary

• Altria stock fell 6.6% to $45.52 on Thursday. It is at 10x 2021 guided EPS, a 7.9% Dividend Yield, and offers a 20%+ annualised return.

• We view the U.S. IQOS import ban as irrelevant; instead investor should be more focused on potential tobacco tax increases being proposed.

• They could raise retail prices by a teens percentage in cigarettes, mid double-digit in vapor and snus, and 75% plus in nicotine pouches.

• Precedents in U.S federal taxes, California and Saudi Arabia show how different price changes impacted cigarette volume and earnings.

• The increases would make Altria a relative winner and Swedish Match a big loser; the market seems to think the proposals will not happen.

Why Is Altria Stock Falling?

Altria stock fell 6.6% on Thursday (September 30), after the U.S. International Trade Commission issued an order to ban imports of IQOS devices, following a ruling in May. Philip Morris (“PM”) stock fell 4.7% while British American Tobacco stock fell 4.5% in London (with approx. 2% a…