RAI Reynolds American (delisted)

In order to enhance shareholders’ value, the board of Altria Group, Inc. (MO) has planned to raise Altria’s regular quarterly dividend by 7.9% to 41 cents per share.

The quarterly dividend will be paid on October 11, 2011 to shareholders of record as of September 15, 2011. The new annualized dividend rate is $1.64 per common share, and the dividend increase from 38 cents per share is also consistent with Altria’s dividend payout ratio target of approximately 80% of its adjusted earnings per share.

Altria posted adjusted earnings of 53 cents per share in the second quarter of 2011 on July 20, which was up 6.0% from the prior-year quarter and in line with the Zacks Consensus Estimate.

Altria’s revenue for the Cigarettes segment increased 2.1% in the quarter, while it increased 3.6% for the Smokeless products. Net revenue for the Cigars segment declined 3.9% year over year in the second quarter of 2011, while it surged 9.4% for the Wine segment based on higher premium shipment volume.

Further, Altria is well positioned to grow in the smokeless tobacco segment, with its new product launches in addition to its strong product mix and pricing power. However, on the flip side, Altria’s cigarettes segment, which currently contributes over 70% of tobacco sales in the U.S., is continuously seeing volume declines due to growing health consciousness among consumers, a ban on public smoking as well as high excise taxation on tobacco products and other legislative controls.

Management at Altria also stated that the business environment for 2011 is expected to remain challenging. This is because adult consumers remain under economic pressure and face high unemployment. In addition, Altria’s tobacco operating companies also face a number of fears as they enter 2011.

However, the company is on track to exceed its goal of $1.5 billion in cost reductions.

In the second quarter of 2011, Altria achieved cost savings of $80 million and expects to achieve at least $30 million in additional cost savings by the end of 2011.

Besides dividend, Altria repurchased 22.8 million shares at an average price of $27.07 aggregating $616 million during the second quarter, as part of its previously announced $1 billion one-year share repurchase program.

Headquartered in Richmond, Virginia, Altria engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally. It competes with Reynolds American Inc. (RAI) and Lorillard, Inc. (LO).

 
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