Quick Read
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Altria and Enterprise Products Partners each yield ~6.2% forward, with EPD backed by a 1.9x distribution coverage ratio and uninterrupted payouts since 1999.
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British American Tobacco trades at just 11 times forward earnings with a 63% payout ratio, making it the cheapest and most conservatively paid dividend of the three.
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All three raised payouts within the past year and blend to a ~6% forward yield, each covered by real operating cash flow.
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Tobacco and midstream energy remain two of the most reliable cash sources an income investor can own, and these three names back their payouts with solid cash-flow coverage. Using each company's annualized forward payout and the latest closing prices, Altria( NYSE:MO ), Enterprise Products Partners( NYSE:EPD ) and British American Tobacco( NYSE:BTI ) blend to an ultra-high forward yield of roughly 6.1%. Each of the three raised its payout within the past year.
Altria: A Fresh Raise Backed by Growing Earnings
Altria'strailing yield is 5.94%, but the latest raise to $1.11 per quarter lifts the forward yield to about 6.2% at a $71.66 share price.
Dividend safety:The new annual rate represents roughly 79% of the low end of full-year adjusted EPS guidance of $5.61 to $5.72, which management narrowed while raising the bottom end. This is high but standard for a mature tobacco business. The quarterly payout has risen every year from $0.80 in 2019 to the current level. Altria returned roughly $3.9 billion to shareholders in the first half via dividends and repurchases. Years of buybacks have left equity negative at $2.618 billion, and the company holds $2.367 billion in cash.
Bull case:Shares trade at about 12 times forward earnings with a beta of 0.461, so this income stream comes with low volatility. Shares are up 30.31% year to date.
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Risk:Marlboro's retail share fell 1.5 points to 39.5% while domestic cigarette volume declined 5%.
Enterprise Products Partners: 1.9x Coverage Leads the Group
Enterprise'strailing yield is 6.0%. Its $2.24 annualized forward distribution works out to a yield of about 6.2% at a share price of $35.91. The $0.56 distribution has an ex-date of October 30.
Dividend safety:Operational distributable cash flow reached $2.3 billion last quarter, covering the distribution 1.9x. Over the trailing 12 months, distributions plus buybacks used just 56% of adjusted operating cash flow. Leverage is at the partnership's 3.0 net target, about 97% of debt is fixed-rate, and liquidity is around $5 billion. Enterprise has paid quarterly distributions without interruption since 1999, and the payout has grown from $0.225 back then.
Bull case:Adjusted EBITDA hit a record $2.83 billion, up 17%, and $6.5 billion of organic projects are under construction. Those projects lay the foundation for future raises. CNBC's Jim Cramer recently called it "a really well-run company."
Risk:Management warned that new export capacity arriving over the next 12 to 18 months could bring "just overall lower rates" on terminal fees.
British American Tobacco: Biggest Raise at the Lowest Multiple
BritishAmerican Tobacco's ADR has a trailing yield of 6.02%. Its annualized forward payout of $3.339404 comes to about 6.0% at $55.62.
Dividend safety:The quarterly ADR payment rose to $0.834851 from $0.749068 a year earlier and $0.743059 before that. The trailing dividend uses about 63% of earnings, the most comfortable payout ratio in this group. Operating cash flow of $6.342 billion far exceeded capex of $551 million. Management targets leverage of 2.0x to 2.5x adjusted net debt to EBITDA by year-end and has committed to a £1.3 billion buyback.
Bull case:At about 11 times forward earnings, British American Tobacco is the cheapest of the three. Modern Oral segment revenue rose 47.4% to $1.165 billion, and guidance calls for 5% to 8% adjusted diluted EPS growth.
Risk:Because the dividend is declared in British pence, currency fluctuations affect what U.S. holders actually receive. Management expects an approximately 3% translational foreign-exchange drag this year.
Three Covered Payouts Near a 6% Floor
Enterprisehas the best payout coverage, British American Tobacco has the lowest payout ratio and valuation, and Altria has the steadiest record of annual raises. Together, they produce a forward yield of approximately 6.1%, and every payout is backed by real cash flow. Enterprise's next ex-date falls in late October.
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