09-20-2019, 10:18 AM
I personally don't see a good future for any of the tobacco stocks. I have been saying this for years already. Smoking is on it's way out, that is a fact in the western world and also very likely to happen in developing countries.
If, and that is a real if, they can keep paying those dividends then I don't think you'll go wrong with investing into MO here. But the fact is that they are looking at a payout ratio close to 100% (if you look at the real eps, not adjusted), and on a cash flow basis the current payout ratio is already 125% for the first half of this year. (3 billion divs paid, 2.4 billion cash from operations)
I'm not sure if the potential PM merger will help with the payout ratios but the way I see it, the current levels aren't sustainable unless something changes. That doesn't mean that they won't be piling on more and more debt to keep the div increase streak alive but I think we all know how that ends in the long term.
If, and that is a real if, they can keep paying those dividends then I don't think you'll go wrong with investing into MO here. But the fact is that they are looking at a payout ratio close to 100% (if you look at the real eps, not adjusted), and on a cash flow basis the current payout ratio is already 125% for the first half of this year. (3 billion divs paid, 2.4 billion cash from operations)
I'm not sure if the potential PM merger will help with the payout ratios but the way I see it, the current levels aren't sustainable unless something changes. That doesn't mean that they won't be piling on more and more debt to keep the div increase streak alive but I think we all know how that ends in the long term.