Altria Group (MO) — formerly Philip Morris — is one of the world’s largest producers and marketers of cigarettes and other tobacco products.  However, the company’s current motto is “Moving Beyond Smoking” as it pushes smoke-free products and harm reduction.

Regardless of your stance on tobacco stocks, Altria Group (MO) still does more than $20 billion in annual revenues and has a market cap of just under $90 billion.  As shown below, the stock has also been trending steadily higher for the last six months.

While Altria has seen share-price appreciation over the last six months, it is most known for its high-dividend yield.  MO currently has a dividend yield of more than 7.5%, which makes it the second-highest-yielding stock in the S&P 500 behind Walgreens (WBA).  According to Insider Monkey, Altria has increased its dividend for 54 consecutive years, making it one of the longest-running Dividend Aristocrats.

Hypothetically, had you invested $10,000 in Altria Group (MO) shares at the start of 1990, re-invested dividends, and held to today, your shares would currently be worth roughly $1,041,000.  That’s a gain of more than 10,000%!

A huge chunk of those gains since 1990 have come from re-investing dividends.  As shown below, MO shares are only up 1,549% (8.4% annualized) in price over this time frame compared to its total return of more than 10,000% (14.3% annualized).  It will be tough to find a better example of the compounding effects of re-investing big dividend payments than MO.  Using the Rule of 72, with no share price appreciation at all, MO’s annual dividend yield of 7.8% would double your money in just over 9 years.

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Welcome to Bespoke Brunch Reads — a linkfest of some of our favorite articles over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

“Meltdown Monday”: On September 15th, 2008, the 158-year-old investment bank Lehman Brothers filed for bankruptcy, marking the largest corporate collapse in US history. The fall of Lehman, once considered “too big to fail,” sent shockwaves across the global financial system, intensifying an already festering crisis. Many wondered how one of Wall Street’s most storied institutions, which had survived the Civil War and the Great Depression, could swiftly unravel. Lehman’s downfall was triggered by its heavy exposure to subprime mortgages, a ticking time bomb that exploded with the collapse of the US housing market. As the value of these risky assets plummeted, the firm drowned itself in debt, unable to secure enough capital to stay afloat. While other struggling banks like Bear Stearns had been rescued through emergency bailouts or acquisitions, Lehman found no lifeline.

In reaction, the Dow Jones Industrial Average plunged over 500 points, its largest single-day drop since the September 11 attacks. Credit markets froze as banks and financial institutions grew fearful of lending, unsure of who might be next to collapse. Across the globe, stock markets tumbled, and governments rushed to contain the growing instability.

Labor

Wall Street Curbs Young Bankers’ Hours After Overwork Outcry (WSJ)
JPMorgan and Bank of America are tightening up on how much junior bankers work after a Wall Street Journal report exposed the intense overwork culture on Wall Street. JPMorgan is now capping hours at 80 per week for junior staff, while Bank of America is introducing a new tool that requires daily tracking of hours and tasks. These changes come after stories of young bankers being pushed to lie about their hours and even a tragic case where a Bank of America associate died after working multiple 100-hour weeks. Though banks have tried limiting hours before, sticking to those rules hasn’t always been easy. [Link]

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