Shareholders in Altria Group (NYSE:MO) are in the red if they invested five years ago

By
Simply Wall St
Published
February 23, 2022
NYSE:MO
Source: Shutterstock

While not a mind-blowing move, it is good to see that the Altria Group, Inc. (NYSE:MO) share price has gained 16% in the last three months. But over the last half decade, the stock has not performed well. After all, the share price is down 32% in that time, significantly under-performing the market.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for Altria Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, Altria Group's earnings per share (EPS) dropped by 29% each year. The share price decline of 7% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
NYSE:MO Earnings Per Share Growth February 23rd 2022

It might be well worthwhile taking a look at our free report on Altria Group's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Altria Group's TSR for the last 5 years was -6.3%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Altria Group shareholders have received a total shareholder return of 24% over the last year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.2% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 4 warning signs we've spotted with Altria Group .

Of course Altria Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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