Key Points
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As a Dividend King, Altria Group has a long history of raising dividends.
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Reinvesting your dividends helps you reach the full potential of compound interest.
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People often talk about a company's dividend in terms of the dollar amount or yield. That's important, along with checking its cash flow and earnings to see if the company can afford the payments.
But it's also interesting to see how much cash your stock investment will generate over time. Altria Group (NYSE: MO) raised its dividend last month, marking the 61st increase in 57 years. That makes the company a Dividend King, a group of companies that have raised payouts for at least 50 straight years.
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By making a few assumptions, let's see how much income investors could receive by making a small $150 monthly investment in Altria Group over the next decade.
The company hiked its quarterly dividend by 4.7% to $1.11 per share, in line with its targeted mid-single-digit percentage increase through 2028. Using that assumption seems like a good place to start.
Assuming a flat share price, reinvesting dividends into additional shares, and a 4% annual increase over 10 years, investors would receive $8,675 in dividends. What if Altria Group's board of directors raises dividends by 6% a year? You'd have $10,160.
Of course, it's also useful to look at more conservative scenarios. If the company increased payouts by a modest 2% annually, you'd have received $7,430.
What if you don't reinvest the dividends? Your monthly investment, assuming a 6% annual increase, would provide $7,883 in total dividends. And at the low end, a 2% increase in dividends would give you $6,072.
Investors should note that these calculations don't take taxes into account. Your tax rate depends on your situation, but if you own Altria Group's shares in a taxable brokerage account, you'll likely have a lower after-tax amount.
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Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.