Altria Group and AT&T: High-Yield Stocks with Growth Potential
In the dynamic landscape of the stock market, Altria Group and AT&T distinguish themselves not only with their high-yield dividends but also with the potential for consistent growth in payouts. Despite the challenges both entities have faced, their strategies toward adaptation and growth spark interest among investors looking for valuable picks.
Altria Group: Weathering the Storm with a Robust Dividend Yield
Altria Group, renowned for its flagship product, Marlboro, in the U.S., has faced a downturn, with shares dipping by approximately 23% since their peak in 2022. Nevertheless, the company boasts an impressive 9% yield, a beacon for dividend investors. Remarkably, Altria Group has consistently increased its dividend for 54 consecutive years, a testament to its financial resilience. Despite this, the declining trend in combustible cigarette sales casts a shadow over future payout increases.
The shift towards alternatives like flavored e-vapor products, from which Altria is barred due to FDA regulations, has impacted its market share. However, the acquisition of NJOY in 2023, one of the few e-cigarette systems approved by the FDA, signals Altria's strategic maneuvering within these constraints. With the FDA's increased enforcement expected to curb the illicit vape market, Altria anticipates a rebound, notably with a 2.3% raise in adjusted earnings per share in 2023.
AT&T: Pivoting Towards Growth Amid Challenges
AT&T's journey has been marked by significant restructuring, notably with the spinoff of its media assets and a subsequent dividend cut in 2022. The company's stock has seen a 29% fall from its early 2021 high, burdened by the exit of traditional wireline subscribers and being the last to launch a 5G-based fixed wireless internet service.
Despite these setbacks, AT&T showcases signs of robust growth, particularly with its 5G infrastructure and fiber internet sales, the latter witnessing over 1 million new subscribers for the sixth consecutive year. This pivot has not only compensated for declining landline sales but also propelled broadband sales by 8% last year. With a free cash flow surge to $16.8 billion in 2023 from $14.1 billion in 2022, AT&T is on a clear path to overcoming its challenges, bolstered by a promising 6.3% yield.
Investors seeking high-yield opportunities might find solace in Altria Group and AT&T, as both conglomerates exhibit not just resilience in the face of adversity, but an unwavering commitment to growth and value creation.
Analyst comment
Positive news: Altria Group and AT&T are high-yield stocks with growth potential. Altria Group has a robust dividend yield and consistent dividend growth despite challenges in the combustible cigarette market. AT&T is pivoting towards growth with its 5G infrastructure and fiber internet sales, compensating for declines in other areas. Both companies demonstrate resilience and commitment to value creation.
As an analyst, I anticipate that both Altria Group and AT&T will continue to face challenges but will ultimately overcome them and experience growth. The acquisition of NJOY and the rebound in adjusted earnings per share signal a potential recovery for Altria Group. AT&T’s focus on 5G and fiber internet will help it overcome declining landline sales and drive revenue growth. Overall, these stocks have the potential to provide high yields and generate value for investors.
