From a technical standpoint, I can understand why Altria is a good dividend paying company. I also understand the business model. They make a chemically addictive product 🚬 that people find very hard to give up. In fact, there's a whole business around giving up tobacco. Think of all the nicotine patches and nicotine gum sold. And this is where the thesis for Altria starts falling apart.
Again, from an interview on Talking Billions ... can't remember the guest's name ...
Altria's business model is built around the idea of someone getting paid to dig a hole and another person getting paid to bury the hole. In the end, the ground stays flat. Altria produces a legal product that makes a hole and a company like Glaxo Smith Kline buries that hole. Nothing is rising above ground level. 😑
I would not feel good about owning a business like this and pocketing a piece of the cash flows. Also, with two kids, the last thing I want to see is them start a tobacco related habit. The health issues from long term tobacco use is devastating. There is no "moderate amount" that can be consumed without ill health effects. ☠️
I understand the same idea can be applied to many businesses. Coca-Cola for their sugary drinks 🥤(diabetes). Coors for their beer 🍺(alcoholism and drunk driving), Las Vegas Sands for the casinos 🎲(gambling addictions). These are all vices. Each of us has to find where that line of acceptability is. In some cases, we can even contract ourselves. 🤷 We're OK with something here but not there. Altria crosses that line for me.
The market is big and there are many high yielding options that don't run the risk of being value traps. BDCs like Hercules Capital (HTGC) and Main Street Capital (MAIN) come to mind. In some cases their total return performance may not match Altria's. But think of the business model. As a lender, a good portion of the economy flows through their books. They still dig a small hole (debt, loans, etc) but the pillars grown on top of the fill-in can far outshine the impact of the initial hole.
It's important that you only invest in companies that you support. It's good that you set your own standards. There are always plenty of other opportunities out there!
From a technical standpoint, I can understand why Altria is a good dividend paying company. I also understand the business model. They make a chemically addictive product 🚬 that people find very hard to give up. In fact, there's a whole business around giving up tobacco. Think of all the nicotine patches and nicotine gum sold. And this is where the thesis for Altria starts falling apart.
Again, from an interview on Talking Billions ... can't remember the guest's name ...
Altria's business model is built around the idea of someone getting paid to dig a hole and another person getting paid to bury the hole. In the end, the ground stays flat. Altria produces a legal product that makes a hole and a company like Glaxo Smith Kline buries that hole. Nothing is rising above ground level. 😑
I would not feel good about owning a business like this and pocketing a piece of the cash flows. Also, with two kids, the last thing I want to see is them start a tobacco related habit. The health issues from long term tobacco use is devastating. There is no "moderate amount" that can be consumed without ill health effects. ☠️
I understand the same idea can be applied to many businesses. Coca-Cola for their sugary drinks 🥤(diabetes). Coors for their beer 🍺(alcoholism and drunk driving), Las Vegas Sands for the casinos 🎲(gambling addictions). These are all vices. Each of us has to find where that line of acceptability is. In some cases, we can even contract ourselves. 🤷 We're OK with something here but not there. Altria crosses that line for me.
The market is big and there are many high yielding options that don't run the risk of being value traps. BDCs like Hercules Capital (HTGC) and Main Street Capital (MAIN) come to mind. In some cases their total return performance may not match Altria's. But think of the business model. As a lender, a good portion of the economy flows through their books. They still dig a small hole (debt, loans, etc) but the pillars grown on top of the fill-in can far outshine the impact of the initial hole.
Just some thoughts. 😃
It's important that you only invest in companies that you support. It's good that you set your own standards. There are always plenty of other opportunities out there!