Financial Survey: Altria Group (MO) & Vector Group (VGR)

Altria Group (NYSE: MO) and Vector Group (NYSE:VGR) are both mid-cap consumer staples companies, but which is the superior business? We will contrast the two companies based on the strength of their profitabiliy, earnings, analyst recommendations, institutional ownership, dividends, valuation and risk.

Risk and Volatility

Altria Group has a beta of 0.66, indicating that its stock price is 34% less volatile than the S&P 500. Comparatively, Vector Group has a beta of 0.48, indicating that its stock price is 52% less volatile than the S&P 500.

Dividends

Altria Group pays an annual dividend of $2.44 per share and has a dividend yield of 3.1%. Vector Group pays an annual dividend of $1.60 per share and has a dividend yield of 7.3%. Altria Group pays out 33.0% of its earnings in the form of a dividend. Vector Group pays out 420.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Vector Group has increased its dividend for 8 consecutive years. Vector Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Altria Group and Vector Group’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Altria Group $19.40 billion 7.77 $9.66 billion $7.39 10.52
Vector Group $1.28 billion 2.21 $291.57 million $0.38 57.46

Altria Group has higher revenue and earnings than Vector Group. Altria Group is trading at a lower price-to-earnings ratio than Vector Group, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and target prices for Altria Group and Vector Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Altria Group 1 5 6 0 2.42
Vector Group 0 0 1 0 3.00

Altria Group currently has a consensus target price of $71.92, suggesting a potential downside of 7.46%. Vector Group has a consensus target price of $27.00, suggesting a potential upside of 23.51%. Given Vector Group’s stronger consensus rating and higher probable upside, analysts plainly believe Vector Group is more favorable than Altria Group.

Institutional & Insider Ownership

62.0% of Altria Group shares are owned by institutional investors. Comparatively, 47.0% of Vector Group shares are owned by institutional investors. 0.2% of Altria Group shares are owned by company insiders. Comparatively, 12.9% of Vector Group shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Altria Group and Vector Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Altria Group 55.99% 76.43% 15.22%
Vector Group 2.76% -37.58% 5.84%

Summary

Altria Group beats Vector Group on 11 of the 17 factors compared between the two stocks.

About Altria Group

Altria Group, Inc. is a holding company. The Company’s segments include smokeable products, smokeless products and wine. The Company’s subsidiaries include Philip Morris USA Inc. (PM USA), which is engaged in the manufacture and sale of cigarettes in the United States; John Middleton Co. (Middleton), which is engaged in the manufacture and sale of machine-made cigars and pipe tobacco, and UST LLC (UST), which, through its subsidiaries, including U.S. Smokeless Tobacco Company LLC (USSTC) and Ste. Michelle Wine Estates Ltd. (Ste. Michelle), is engaged in the manufacture and sale of smokeless tobacco products and wine. Its other operating companies include Nu Mark LLC (Nu Mark), a subsidiary that is engaged in the manufacture and sale of tobacco products, and Philip Morris Capital Corporation (PMCC), a subsidiary that maintains a portfolio of finance assets. Other subsidiaries include Altria Group Distribution Company and Altria Client Services LLC.

About Vector Group

Vector Group Ltd. is a holding company. The Company is engaged in the manufacture and sale of cigarettes in the United States through its Liggett Group LLC (Liggett) and Vector Tobacco Inc. (Vector Tobacco) subsidiaries, and the real estate business through its New Valley LLC subsidiary, which is seeking to acquire or invest in additional real estate properties or projects. The Company’s segments include Tobacco, E-Cigarettes and Real Estate. The Tobacco segment consists of the manufacture and sale of cigarettes. The E-Cigarettes segment includes the operations of the Company’s e-cigarette business. The Real Estate segment includes the Company’s investments in New Valley LLC. The Company owns and seeks to acquire investment interests in a range of domestic and international real estate projects through debt and equity investments.

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