It offered me a number of relatively uninspiring ideas. Two of them though, stood out for entirely different reasons.

Altria

One of the names it suggested to me was tobacco firm Altria (NYSE:MO). On the face of it, that sort of makes sense – the stock has a 7% dividend yield and there aren’t many S&P 500 names in that category.

The trouble is though, the company’s facing some pretty big risks. Its business is exclusively focused on the US, where the number of smokers has been falling sharply.

To be fair, raising prices and buying back shares have kept earnings per share drifting higher as sales have stagnated. But I’m not convinced this is a long-term solution to a declining customer base.

Other tobacco companies – such as British American Tobacco and Philip Morris International – have some promising nicotine pouch products that might offset this. But this isn’t really the case with Altria.

Altria and Philip Morris used to be one company. The latter however, acquired Swedish Match in 2022 (after their separation) and owns the US rights to Zyn – the nicotine pouch product as a result.

As ChatGPT pointed out to me, a 7% dividend yield could return a lot of passive income in the short term. But I think investors have much better opportunities available elsewhere.

Microsoft

At the other end of the spectrum, ChatGPT also suggested Microsoft (NASDAQ:MSFT). Now, that stock fell 10% in a day earlier this week, but the dividend yield’s still only 0.84%.

Microsoft is the opposite of Altria in many ways. It’s a business with a much more positive long-term outlook and it has a number of potential growth opportunities available.

The big risk with the company is that it might be in the process of wasting a lot of money. It’s investing heavily in artificial intelligence (AI) data centres and there’s no guarantee that will pay off.

To some extent, investors can’t do much but trust that Satya Nadella knows what he’s doing. And I do think the CEO has shown a lot of outstanding leadership qualities. 

Even the best operators make mistakes. But even beyond AI, Microsoft has an extremely strong position in its enterprise software division that makes it incredibly difficult to compete with.

I think there are good reasons to look seriously at Microsoft shares after the latest decline. But a dividend yield below 1% means I don’t see a case for buying it from a passive income perspective.

Dividend stocks

There’s more to income investing than just looking at dividend yields. Altria’s one of the highest in the S&P 500, but I think there are a lot of risks for the company in the near future.

Microsoft looks like a more promising overall investment to me. But at today’s prices, it would take a huge cash outlay to generate meaningful passive income from the stock.

In other words, I’m not that convinced by ChatGPT’s latest suggestions for dividend investors in the month ahead. I think there are some real opportunities right now, but not these ones.

The post I asked ChatGPT for its top passive income stocks to buy in February and it said… appeared first on The Twelfth Magpie.

But share prices can fall, meaning that overall one makes a loss even after considering the dividend income. Dividends are never guaranteed. On top of that, it takes money to make money – buying shares is not free, after all.

Here are some of the things I like and dislike about owning shares as a way to earn passive income.

Capital requirement

First, the need for money. Very few passive income ideas require zero cash at all. But some are more capital-intensive than others.

Imagine I want to make a £1,000 passive income annually and invest in shares with an average dividend yield of 7%. To hit my target, I would need to invest around £14,300.

But there are caveats that could help me hit my target at some point even if I did not have that sort of money to invest upfront.

I could drip feed money into a share-dealing account or Stocks and Shares ISA over time. So while I may not hit my £1,000 passive income target in year one, I could achieve it down the line.

Another option is I could start to earn dividends on my dividends. This is known as compounding and is a well-known approach of billionaire investors such as Warren Buffett. He compares it to pushing a snowball downhill so the snow starts to pick up snow, increasing the size.

As an example, if I invested only £5,000 now and compounded the 7% dividends annually, after 16 years I ought to be earning £1,000 each year in passive income.

Finding income shares to buy

What about one of the other challenges? Finding shares that will hopefully not lose value and also generate dividends?

The short answer is, there are no guarantees in the stock market.

Even a great company can run into unforeseeable difficulties. That is why seasoned investors like Buffett spread their portfolios over a range of different shares – and I would do the same, even with a modest amount to invest.

But I think we can learn some other lessons from Buffett when it comes to finding the sorts of shares that might generate passive income. He thinks of buying a small stake in a company, not just a share.

Take my shares in Altria (NYSE: MO) as an example. It has strong brands, something Buffett likes, as brands can help give a company pricing power, supporting profits and dividends. It is in an industry I understand, tobacco, meaning I am able to assess the risks and opportunities involved.

With a dividend yield of 8.7%, Altria certainly offers me sizeable passive income potential.

But its main business is cigarettes. Demand for them remains high but is in long-term structural decline. Governments are increasingly introducing legislation to try and stub out cigarette demand. And consumers seem to be getting the health message loud and clear. So although Altria has raised its dividend annually for 54 years in a row that does not mean it will keep doing so. Then again, it may do!

The post A £1,000 passive income just from buying shares? Yes, it’s possible! appeared first on The Twelfth Magpie.

Altria

US tobacco giant Altria (NYSE: MO) recently announced yet another increase in its annual dividend. That means the Dividend Aristocrat now has a continuous run of annual increases stretching back over half a century.

With famous brands such as Marlboro in its US portfolio, the company is a free cash flow machine. It has been good at using those flows to reward shareholders in the form of dividends.

The shares currently yield 8.8%. While dividends are never guaranteed, I expect the company will try to extend its long run of annual increases in years to come.

What could go wrong? One obvious risk is the declining popularity of smoking cigarettes in the company’s key markets.

Altria has been less impressive than some rivals in finding promising new revenue streams. For now, I think the cigarette business looks set to continue generating big profits. But I will be keeping an eye on how Altria reshapes its non-cigarette portfolio in the coming years.

Income & Growth

Income & Growth VCT (LSE: IGV) is a venture capital trust that invests in up-and-coming businesses. It then often holds its stake for years, hoping to sell at a profit. That strategy has worked well for years — and allowed the trust to make generous dividend payments.

The yield currently stands at 11.3%. But an important factor to understand when it comes to Income & Growth shares is that the dividend tends to move around quite a bit.

The trust aims to pay a dividend of at least 6p per share each year (although, like all dividends, this is never guaranteed).

Its interim dividend alone this year was 4p per share, so I expect the full-year payout to be higher than 6p. Given that the shares currently trade for about 71p each, I think it means this could be a very rewarding dividend stock to add into my portfolio.

How the trust performs in coming years will depend on the performance of its underlying investments. One risk I see is that a challenging economy makes it harder for young companies to grow. That could mean Income & Growth holds onto its stakes for longer, reducing the flow of funds available to pay dividends.

As a long-term investor though, I am already used to taking the long view. So an ebb and flow of dividends from Income & Growth would be fine by me if, overall, owning the share offered me a substantial passive income opportunity in years to come.

The post 2 dividend stocks I’m eyeing for September appeared first on The Twelfth Magpie.

In the past several months I’ve bought one of those UK Dividend Aristocrats. I’ve also purchased a US dividend powerhouse for my portfolio. Here is why.

Cash flow machine

The US Dividend Aristocrat I invested in is Altria (NYSE: MO), the manufacturer behind iconic tobacco brands including Marlboro.

As an industry, tobacco has attractive economic characteristics. Products are cheap to make but can be sold at a high price. Owning premium brands like Marlboro gives a manufacturer pricing power. That throws off huge cash flows. As a mature industry, there is limited room for growth (in fact, tobacco sales volumes are in global decline), so reinvestment costs for the business are lower than fast-growing firms with high capital expenditure requirements.

So a company like Altria (or UK rival British American Tobacco, which is also a serial dividend raiser) can fund a hefty dividend. Altria has raised its payout annually for more than half a century.

Dividend sustainability

But what happened in the past does not necessarily give an indication of what will come in future.

As tobacco volumes continue to decline, sales could fall at Altria. Its pricing power can help the manufacturer mitigate falling sales volumes by boosting prices. But it can only do that so much before losing customers.

In the long term, I see a risk to the Altria dividend. But I think the company may have many good years or decades of profit left in it yet. With an 8.0% dividend yield, it is a juicy income provider for my portfolio.

Avoiding overpaying

There are a few UK Dividend Aristocrats I have been eyeing for a while without buying, because I felt the shares were too expensive. If Diageo shares were cheaper, for example, I would happily add them to my portfolio. But for now, I am not buying them.

Over the past year, the DCC share price has tumbled 28%. That offered me a buying opportunity and I have seized it to add the diversified conglomerate to my portfolio.

Growth focus

The shares currently yield 4.0%. I am hopeful that dividends can grow in future if the business continues to generate enough spare money from its range of operations. Those include a large gas distribution business. That highlights some of the risks with DCC shares: surging gas prices have helped sales, but when they fall back in future that could eat into revenues and profits.

DCC has proven it knows how to build a business, though. I think it remains well positioned for growth thanks to a broad spread of activities and proven management.

The dividend last year rose by 10% for the second year in a row. DCC’s record of annual dividend increases stretches back 28 years. I see further opportunities for the company to grow organically and by acquisition. That could be good news for future dividends.

The post 2 Dividend Aristocrats I’ve bought for growing income appeared first on The Twelfth Magpie.

I own a couple of cheap shares I think continue to look attractively valued, given their prospects. I would be happy to hold both for the coming decade.

JD Sports

When retailer JD Sports (LSE: JD) unveiled its strategic focus for coming years to the City last week, it was greeted with enthusiasm. That explains why the shares have gained over a third in value so far in 2023.

Despite that though, they are still 2% lower than a year ago. I think that offers great value for my portfolio. Indeed, I have been buying more shares in JD Sports lately to add to my existing holding.

Why do I think the shares are cheap? At the moment, the company has a market capitalisation of £9bn.

But after a bumper trading period in the second half of last year, the firm expects to deliver headline profit before tax and exceptional items of just over £1bn for its current financial year. The new plans could mean future financial performance is even stronger yet, meaning the prospective price-to-earnings (P/E) ratio is in single digits. That makes them cheap shares, in my book.

Ambitious growth plans

Those plans include double digit revenue growth and opening 250-350 new stores each year.

Rapid expansion can elevate risks. While sportswear-loving customers like to keep their eye firmly on the ball, it can be harder for a firm to do that when opening on average at least one store every weekday. Economic uncertainty could also reduce consumer willingness to spend, hurting revenues and profits.

But I think JD Sports may well power on. It has huge ambition as well as a proven business model. The brand is strong, the commercial operations look world-class and it competes effectively both online and offline.

Altria

The economics of making and selling cigarettes are attractive. They are cheap to produce and customers pay a hefty price for them.

That explains my investment in several tobacco manufacturers, including US giant Altria (NYSE: MO). While it may not be a household name on this side of the pond, the company owns such iconic brands as Marlboro.

Dividend aristocrat

The business is highly lucrative and that makes for juicy dividends. The yield is 8.1%.

Despite that, these look like dirt-cheap shares to me. The firm trades on a P/E ratio of around 9 although I see it as a moneymaking machine.  

With over half a century of annual increases in its payout giving Altria dividend aristocrat status, why is it valued like this?

There is a risk that, as cigarette smoking continues its steady decline in popularity, Altria’s profits will go up in smoke. I think this risk is real and large. But the company’s premium brands give it strong pricing power and allow it to push up selling prices even as volumes decline. I think Altria still has many good years ahead of it.

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Here are a couple of shares I own that I expect to hold for the long term. They currently trade on what I think are very attractive valuations. If I had spare money to invest in my portfolio, I would happily buy more of both today.

JD Sports

At the moment, retailer JD Sports (LSE: JD) has a market capitalisation of £8.4bn. But the company said this month that it expects its annual headline profit before tax and exceptional items to top £1bn. On that basis, the pre-exceptional headline price-to-earnings (P/E) ratio of less than 9 looks cheap to me.

It apparently looks cheap to other people too. The company’s chairman spent almost a quarter of a million of pounds buying JD Sports shares this month at around £1.51 each. They have already moved up in price since then, but these cheap shares remain 12% below their price a year ago despite strong business performance.

Looking for value

The reason I see JD Sports shares as cheap is not just because of their price. It also takes into account what I see as the future commercial prospects for the retailer.

Sales are expected to reach a record high in the firm’s current financial year. Profitability is strong. I do see risks, such as a recession leading customers to spend less, hurting sales. But JD’s broad geographic reach, differentiated brand and multichannel strategy could help it do well over the long term, in my view.

Altria

Tobacco can be a very rewarding business. Cigarettes are cheap to make but can command a premium price. There is clearly a risk for investors, as sales decline over time. But revenues remain large and premium brands can give their owners pricing power.

That explains my investment in FTSE 100 stalwart British American Tobacco. But I have also been looking for cheap shares across the pond. I own a stake in US Marlboro-maker Altria (NYSE: MO). As a believer in long-term investing, I would be happy to hold it my portfolio for years to come.

8%+ dividend yield

Altria shares yield a juicy 8.4%, meaning the company’s quarterly dividend regularly provides a welcome boost to my passive income streams. This year’s dividend grew 4.5% compared to the prior year. Strong cash flows could help the payouts keep rising, although falling cigarette sales mean the dividend could be cut, or scrapped altogether, in future.

I think there is a lot of life left in the firm’s profit streams though. I reckon a P/E ratio of around 10 makes these cheap shares. That is why I would be happy to grow the number of Altria shares I own while they trade at their current level.

The post 2 dirt-cheap shares I’ve bought to hold for years appeared first on The Twelfth Magpie.

ITV

Why do I own shares in broadcaster ITV (LSE: ITV)? Its strong business and the 6.4% dividend yield attracted me.

But not everyone is convinced the firm has a strong future, as terrestrial television declines in popularity and the advertising market suffers in a recession. However, ITV continues to generate sizeable revenues from advertising. In fact, they grew 5% in the first half of this year, compared to the same period last year.

ITV has launched an advertising-funded streaming service and saw a 55% year on year increase in the number of hours viewers streamed in the first month after launch. That could help support further ad revenue growth.

On top of that, I see value in the company’s production arm as demand for original media content remains buoyant. Trading on a price-to-earnings ratio of under 7, I see these shares as a potential bargain for my portfolio.  

M&G

Another high-yield share I own in my portfolio is M&G (LSE: MNG). For starters, the company operates in an area I expect to see sustained demand over the long term: financial services.

While that can be a crowded field, M&G’s long experience, reputation and established brand help set it apart from competitors. It has a proven ability to generate attractive profit margins. Last year’s earnings after tax of £92m were only 2% of revenues. But the prior year, post-tax profits came in at £1.1bn and represented 19.7% of revenues.

A rocky stock market is a risk, as it could lead investors to withdraw funds, hurting profits at the firm. But I see an opportunity for my portfolio here. With a 9% yield, I see the shares as a bargain and will continue to hold them.

Altria

I own some British tobacco companies in my portfolio. But I also see some smoking-hot opportunities across the pond.

For example, I currently have a position in Altria (NYSE: MO). As the US distributor of the well-known Marlboro line of cigarettes, I see the company as a virtual gold mine. However, cigarette sales are falling and the company has written down billions of dollars on underperforming investments in cigarette alternatives.

That has led to the Altria share price falling 10% in a year. I see it as a high-yield bargain for my portfolio, with its 8.2% dividend ratio relative to share price. If I had spare cash to invest today, I would add some more Altria shares to my income portfolio.

The post 3 high-yield bargains I own — and would snap up more of while they’re cheap appeared first on The Twelfth Magpie.

I am not a trader but a long-term investor. So I look for cheap shares in great companies then add them to my portfolio with the intention of holding them for years.

In practice, changing circumstances can mean that sometimes I buy shares for the long term but end up selling them sooner than I originally expected. However, here are a couple of shares I have bought that I currently expect to hold for a decade. I think both are attractively valued right now.

Dunelm

Will people still live in homes a decade from now? Will they still want to decorate them? The answer to both questions is yes, in my view.

So if a company can tap into this market in a way that sets it apart from competitors, that could turn out to be a lucrative business model. That is why I own shares in homeware retailer Dunelm (LSE: DNLM).

Its unique design and service proposition, along with an efficient UK-focussed operation that offer economies of scale, help to set it apart from many rivals, in my view.

Sales woes

Despite that, the firm trades on a price-to-earnings ratio of 13. In think that makes these cheap shares. Admittedly, there is a risk earnings may fall as consumers tighten their belts in a recession. Sales in the first quarter of Dunelm’s current financial year were 8% lower than a year before.

But the business has been consistently profitable, pays a generous dividend and has a good track record of carefully managing its balance sheet. Net debt at the end of its last financial year was £24m.

Overall, I like Dunelm’s business model and its current share price. Indeed, if I had spare cash to invest today, I would be happy to add more of its shares to my existing holding.

Altria

I also own shares in British American Tobacco. I appreciate the large passive income streams I generate from the company’s dividends.

But, arguably, rival Altria (NYSE: MO) is even more rewarding, which is partly why I also own shares in the US tobacco giant. Its yield is 8.3%, compared to the 6.6% on offer at British American Tobacco.

I see the shares as fairly cheap. The company has a market capitalisation of $81bn and, last year, its operating income was a massive $12bn. That does not reflect costs like interest and taxes, so net income is lower.

But, like British American, Altria is a cash generation machine. Owning rights to the Marlboro brand and distributing it in the US market is a goldmine for the company.

In the past five years, Altria’s dividend has grown at a compound annual rate of nearly 8%. I am keeping it in my portfolio hoping for further dividend increases in future. That could boost its already juicy yield further.

Future prospects

Will Altria’s financial success last? After all, cigarette volumes are declining. The corporation has made costly mistakes in adapting its portfolio for future demand, as shown in the massive writedowns it has taken on the Juul vaping brand.

Long term though, while cigarette volumes are falling I expect them to remain substantial. The product addictiveness also gives Altria pricing power, which can help it to raise prices to try and offset falling volumes.

The post 2 cheap shares I’ve bought to hold for 10 years! appeared first on The Twelfth Magpie.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Alphabet

What it does: Alphabet is one of the world’s largest technology companies. It is the owner of Google and YouTube.

By Edward Sheldon, CFA. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) shares have taken a big hit in 2022 and I think this has created a great buying opportunity for long-term investors like myself.

While Alphabet’s revenue growth has slowed recently due to weakness in the digital advertising market and currency headwinds, the long-term growth potential here remains significant, in my view.

One potential growth driver is cloud computing. Currently, Alphabet is the third-largest cloud provider behind Amazon and Microsoft, and last quarter it generated revenue growth of 38% in its cloud division.

Another potential growth driver is its ‘Other Bets’ division. Here, the company has exposure to artificial intelligence, self-driving cars, digital healthcare, biotechnology, smart home technology, and more.

Two risks to consider with Alphabet include prolonged weakness across the tech sector and lawsuits against the company. However, with the stock trading on a P/E ratio of less than 20, I think the risk/reward skew is attractive.

Edward Sheldon owns shares in Alphabet, Amazon, and Microsoft.

Realty Income 

What it does: Realty Income is a real estate investment trust (REIT) which operates 11,700 properties spanning multiple sectors. 

By Royston Wild. Encouraging GDP from the States recently showed growth speed up to 2.6% in the third quarter. But the threat of a recession still looms large amid Federal Reserve rate hikes and weak growth elsewhere. 

In this scenario snapping up defensive real estate shares could remain a good idea for nervous investors. Realty Income (NYSE: O) is one such stock on my radar right now. The long-term lease agreements its tenants are locked into should keep earnings stable in what could be a tough 2023. 

I also like Realty Income because of the sector split of its property portfolio. It has significant weighting towards grocery, convenience, discount and drug stores, for example. Businesses within these areas are particularly resistant to recessionary conditions. 

Finally, I believe this US stock could be a great way for me to boost my passive income. It has to pay a minimum of 90% of annual profits out by way of dividends. And it’s raised dividends for 100 straight quarters.

Royston Wild does not own shares in Realty Income. 

United Parcel Service

What it does: United Parcel Service is the world’s largest parcel delivery company, operating primarily in the United States.

By Gabriel McKeown. After a very strong three years, the momentum behind United Parcel Service (NYSE: UPS) appears to have reduced slightly. The stock is down almost 15% this year, however, the underlying fundamentals are remarkably strong. Profit margins are significant, free cash flow is considerably above historical averages, and debt levels remain low.

The company also offers a dividend yield of 2.5%, and this is forecast to reach 3.3% next year. This income generation is another positive lament, as the dividend has been paid consistently for the last 23 years, and grown for the last 7.

This recent share price decline has also resulted in the price-to-earnings ratio falling to 17, which appears to be fair value given the strength of the fundamentals, and positive forecasts. Also given the market share covered by UPS, this should help to isolate the stock from further market negativity.

Gabriel McKeown does not own shares in United Parcel Service.

Veeva Systems

What it does: A cloud-technology company powering the drug development pipeline for pharmaceutical and biotechnology firms globally.

By Zaven Boyrazian. Veeva Systems (NYSE:VEEV) is a little-known enterprise providing the backbone to one of the most critical industries worldwide – healthcare. The firm offers cloud-based software solutions and services for life science companies, enabling the research, development and commercialisation of medicines.

The increasingly complex regulatory environment has made it difficult for competition to arise, enabling Veeva to become industry-standard. And that’s translated into impressive double-digit revenue and profit growth.

With investments in the healthcare sector steadily ramping up, demand for the group’s technology isn’t likely to disappear any time soon. That’s why it’s not surprising that the stock doesn’t trade at a cheap valuation.

The share price premium opens the door to volatility should short any short-term hiccups arise. However, the long-term potential for this business is ginormous, in my opinion. And that justifies the lofty price tag in my mind, hence why I believe it’s one of the best US stocks to buy in December.

Zaven Boyrazian owns shares in Veeva Systems.

Altria

What it does: Altria is a leading US tobacco manufacturing and marketing company whose brands include Marlboro

By Christopher Ruane. One of the US stocks I have added to my portfolio in recent months is Altria (NYSE: MO). If I had spare cash to invest in December, I would buy more of the shares for my portfolio.

The dividend yield of 8.4% is juicy. But it does deflect attention from a core question: how sustainable is the business? Declining cigarette sales are a risk to profits.

But Altria has other sources of income, like its stake of roughly 10% in Budweiser producer Anheuser-Busch InBev.

Meanwhile, Altria’s portfolio of premium tobacco brands gives it significant pricing power. Revenue decline in the first nine months of the year was 3.9% compared to the same period in 2021. The company remains highly profitable. It has spent $1.5bn on share repurchases and $4.9bn on dividends so far this year.

Even as sales continue their long-term decline, I expect Altria to keep producing strong earnings.

Christopher Ruane owns shares in Altria.

Alphabet

What it does: Alphabet is one of the world’s biggest tech conglomerates and is the parent company of Google and YouTube.

By John Choong. Tech stocks have been crushed this year, and Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) is no exception. However, its historically low earnings multiples indicate that its stock could be massively undervalued. With a P/E of 17 and a PEG ratio of 0.2, this could be a once-in-a-lifetime opportunity for me to snatch up Alphabet stock at such a cheap price.

Additionally, the company’s innovations in Search and YouTube present it with plenty of momentum to capitalise on grow in the long term. More lucratively, its Cloud segment continues to grow and snatch market share from Microsoft and Amazon, which presents further upside potential.

It’s worth noting, however, that Alphabet’s costs are running rampant. The tech giant continues to increase its headcount despite inflationary pressures eating into its bottom line, which has disappointed investors. Nevertheless, I’m confident in CFO Ruth Porat’s ability to manage capital efficiently moving forward given its impeccable balance sheet. After all, it’s got an average’ buy’ rating with an average price target of $129.

John Choong has positions in Alphabet.

Amazon

What it does: Amazon.com Inc is a US-based technology giant focusing on e-commerce, cloud computing, online advertising, digital streaming and AI.

By Paul Summers: It seems like everyone and their dog hates big tech stocks right now. Amazon (NASDAQ: AMZN) is one of the biggest casualties. As I type, shares are down 44% year-to-date. That flicks my contrarian switch. 

To be sure, higher interest rates and soaring inflation aren’t doing the retail juggernaut any favours. Lower-than-expected guidance on net sales in the fourth quarter further compounded investors’ misery.

Fortunately, I don’t need to worry about the next few months as a potential long-term investor. Amazon has such a dominant hold in its various markets – particularly highly profitable cloud computing – that it’s only a matter of time before sentiment reverses. News that inflation has peaked could be the catalyst, especially if the Federal Reserve rows back on further rate rises. 

Having been too expensive for me in the past, Amazon stock looks like a great candidate for my growth-focused portfolio.

Paul Summers has no position in Amazon.com Inc.

Berkshire Hathaway

What it does: The company is a conglomerate that acquires businesses using cash generated through its insurance operations.

By Stephen Wright. Looking for a top US stock to buy in December, the choice isn’t difficult for me. Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) is a business like no other.

Berkshire is a collection of smaller businesses, including insurance companies, railroads, and utilities operations.

What impresses me most is the culture of the organisation. This comes down to two things.

The first is its decentralised culture. This empowers managers of individual subsidiaries, who know their businesses the best.

The second is the company’s disciplined financial approach. This enables Berkshire to avoid catastrophic insurance losses.

These two features sound basic, but they set the company apart from others. They’re the reason that the company has been so successful and why I think this will continue.

Right now, the shares trade at what I consider to be a decent valuation. I’ll be looking to add to my investment in December.

Stephen Wright owns shares in Berkshire Hathaway.

The post Best US stocks for December appeared first on The Twelfth Magpie.

Tobacco giant Altria Group (NYSE:MO) has led its industry for decades, finding ways to keep profits rising even as cigarette smoking has become less popular. With interest in tobacco seemingly in a permanent state of decline, some investors think that marijuana would be a better market for Altria to pursue.

Coming into the company’s third-quarter financial report last week, Altria investors were hoping that the tobacco giant would still be able to deliver earnings growth despite the long-term trends among smokers. Altria succeeded on that front, but it remained relatively quiet about its plans for the cannabis market, instead taking steps to address more immediate concerns about e-cigarettes.

IMAGE SOURCE: ALTRIA.

How Altria did

Altria’s third-quarter results marked a good rebound from a poor showing three months ago. Revenue net of excise tax climbed 3.3% to $5.29 billion, which was about $85 million more than most of those following the stock had expected to see. Net income was up 4% to $1.94 billion, and the resulting adjusted earnings of $1.08 per share came in just above the consensus forecast among investors for $1.07 per share on the bottom line.

From a segment perspective, Altria’s results were reasonably solid across the board. Revenue from the key smokeable products segment, which includes the Marlboro cigarette division, rose 2.7% from year-earlier levels. That came despite substantial declines in cigarette shipment volumes, which were down 3.7% from the third quarter of 2017. That combination left the unit’s operating company income roughly unchanged over the period, and margin levels were down due to higher costs that were offset by higher selling prices. Market share overall fell half a percentage point to 50.1%.

Altria’s smokeless products division did better. Revenue net of excise tax jumped more than 7%, and adjusted operating company income rose by the same 7% figure, as higher pricing was more than enough to overcome rising expenses. Shipment volume inched higher by 0.4%, and once again, the key Copenhagen brand led the way for the segment.

Altria’s wine business was weaker. Revenue was mostly flat, and operating company income fell nearly 20% despite a 2.4% rise in wine shipment volume. Higher costs included some one-time employee bonuses that represented a substantial amount of the small division’s overall profit.

What’s ahead for Altria?

CEO Howard Willard was enthusiastic about the company’s performance. “Altria delivered excellent third-quarter adjusted diluted earnings-per-share growth of 20%,” Willard said, “and continued to return large amounts of cash to our shareholders.” The CEO noted that Altria’s tobacco business is solid, and the company is “making strategic investments to drive long-term success.” Those sentiments led Altria to boost its guidance very slightly, lifting the bottom end of its projected earnings range by $0.01 to set a new range of $3.95 to $4.03 per share.

Yet on the marijuana front, Altria didn’t say much. Willard’s comments were limited to the following:

We are exploring opportunities in the category, and we acknowledge that it is currently federally illegal in the U.S., but we think it’s worth exploring the category because that might change in the future. I’ll hold back on explaining in more detail kind of how we view the category, because we’re relatively early in our exploration.

Instead, Altria discussed plans to respond to the U.S. Food and Drug Administration’s concerns about electronic cigarettes. Altria’s Nu Mark subsidiary will remove the pod-based Elite and Apex products until the FDA issues a market order. For remaining products under the MarkTen and Green Smoke brands, Nu Mark will keep selling tobacco, menthol, and mint varieties, but discontinue all other flavors until it gets FDA approval or it can address concerns about youth use of the products. The move will put pressure on Altria’s competitors, especially those for which e-cigarettes make up their primary business.

Altria shareholders were generally pleased with the report, sending the stock up between 1% and 2% after its release. Although marijuana investors will have to wait a while longer to find out the tobacco giant’s cannabis plans, solid financial performance shows that Altria is doing a good job of keeping pace with its historical track record despite ever-present headwinds.

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