Altria Group (NYSE:MO) versus British American Tobacco (OTCMKTS:BTAFF) Critical Review

Altria Group (NYSE:MO) and British American Tobacco (OTCMKTS:BTAFF) are both consumer defensive companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, earnings, risk, dividends and valuation.

Dividends

Altria Group pays an annual dividend of $3.92 per share and has a dividend yield of 8.8%. British American Tobacco pays an annual dividend of $1.42 per share and has a dividend yield of 4.3%. Altria Group pays out 102.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. British American Tobacco pays out 74.3% of its earnings in the form of a dividend. Altria Group has increased its dividend for 14 consecutive years. Altria Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Altria Group and British American Tobacco, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Altria Group	1	2	2	0	2.20
British American Tobacco	0	0	0	0	N/A

Altria Group currently has a consensus target price of $47.50, indicating a potential upside of 6.84%. Given Altria Group’s higher probable upside, analysts clearly believe Altria Group is more favorable than British American Tobacco.

Valuation and Earnings

This table compares Altria Group and British American Tobacco’s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Altria Group	$20.70 billion	3.81	$5.76 billion	$3.81	11.67
British American Tobacco	N/A	N/A	N/A	$1.92	17.43

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Altria Group	27.40%	-225.61%	24.54%
British American Tobacco	N/A	N/A	N/A

Insider and Institutional Ownership

58.9% of Altria Group shares are owned by institutional investors. Comparatively, 39.7% of British American Tobacco shares are owned by institutional investors. 0.1% of Altria Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Altria Group beats British American Tobacco on 10 of the 13 factors compared between the two stocks.

About Altria Group

Altria Group, Inc., through its subsidiaries, manufactures and sells smokeable and oral tobacco products in the United States. The company provides cigarettes primarily under the Marlboro brand; cigars and pipe tobacco principally under the Black & Mild brand; moist smokeless tobacco products and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands; and on! oral nicotine pouches. It sells its tobacco products primarily to wholesalers, including distributors; and large retail organizations, such as chain stores. The company was founded in 1822 and is headquartered in Richmond, Virginia.

About British American Tobacco

British American Tobacco p.l.c. engages in the provision of tobacco and nicotine products to consumers worldwide. It offers vapour, tobacco heating, and modern oral nicotine products; combustible cigarettes; and traditional oral products, such as snus and moist snuff. The company offers its products under the Vuse, glo, Velo, Grizzly, Kodiak, Dunhill, Kent, Lucky Strike, Pall Mall, Rothmans, Camel, Natural American Spirit, Newport, Vogue, Viceroy, Kool, Peter Stuyvesant, Craven A, State Express 555 and Shuang Xi brands. It distributes its products to retail outlets. The company was founded in 1902 and is headquartered in London, the United Kingdom.