Title: Why Skipping Ultra-High-Yield Altria Might Be Wise: Here's Why These Unmatched Stocks Take the Lead
Title: Reevaluating Altria's Appeal with Realty Income and Vici Properties as Alternatives
While Altria (MO, -0.57%) might offer a tempting 7% dividend yield, its long-term prospects as an investment are less appealing. Over the past five years, Altria's stock has only seen a modest 10% increase. Investors drawn to Altria's high yield might consider more promising options, like Realty Income (O, -0.78%) and Vici Properties (VICI, -1.89%), which boast yields of 5.6% and 5.4%, respectively.
What sets Altria apart, you ask? Its primary business revolves around tobacco, with cigarettes making up 88% of revenue and Marlboro, the leading North American brand, accounting for nearly 90% of cigarettes sold. Despite boasting a market share close to 42%, Altria is a one-trick pony with a struggling core business. Cigarette volumes have been on a decline, declining by 10.6% year over year in the first nine months of 2024. Altria has managed to offset these losses with regular price hikes, but its long-term sustainability as a dividend payer is uncertain, underlining the importance of being cautious.
Realty Income and Vici Properties emerge as strong alternatives, catering to income-focused investors in search of reliable yields. Both companies are diverse, with net lease real estate investment trusts (REITs) as their bread and butter — a stark difference from Altria's consumer staples profile.
Realty Income has a sizeable and diversified portfolio of retail (73% of rents), industrial, and miscellaneous properties. Its global presence in both North America and Europe makes it the most diversified REIT available, with over 15,400 properties under its belt. Realty Income's growth has been consistent, making it a reliable choice for dividend investors, with an annualized increase of 4.3% over the past three decades.
Vici Properties might win fans of the "sin stock" category. A younger REIT company that went public in early 2018, Vici Properties specializes in experiential properties, with a focus on casinos. It boasts a stable revenue base, boasting a payout ratio of just under 70% of earnings and cash flow. A concentration of assets with two major casino operators, MGM Resorts and Caesars Entertainment, make up a significant portion of the rent roll, but there's no reason to question the reliability of this high-yield REIT.
Which is more important: the high yield or a sustainable business? While Altria's high yield might be enticing, its long-term decline makes it an unappealing bet for conservative investors. Realty Income and Vici Properties could suit your needs better, boasting reliable dividends and stable business models. They also cater to different investor preferences, one leveraging its experience in the casino industry (Vici Properties) and the other, its status as a premier REIT spanning both North and South America (Realty Income). Both companies' business models are more robust and predictable, which makes them stronger choices than Altria.
Given Altria's projected uncertain future due to its reliance on tobacco and declining revenue, investors might want to consider diversifying their portfolio by investing in companies with more stable business models. Realty Income, with its diversified net lease real estate investment trusts and a consistent growth track record, could be an attractive option. Furthermore, Vici Properties, known for its focus on experiential properties and a stable payout ratio, is another strong alternative, offering a high yield without the potential long-term risks associated with Altria.
