With many income stocks on a tear recently, we profiled two income favorites AT&T (NYSE:T) and Johnson & Johnson (NYSE:JNJ) to extrapolate the future returns for investors buying these stocks at their current levels. When talking about income stocks and ones that have run up recently, it is hard to look past Altria Group (NYSE:MO), which is profiled in this article. Let us get into the details. Almost everyone owns this stock for its income. Yes, the recent capital gains are good, perhaps great. Even our most recent transaction on this stock is up 12%. But let’s not lose sight of the fact that this is an income play. Any gains on top of it must be appreciated and not seen as a reason to sell. Altria’s Dividend Growth Rate (DGR) has been about 8% the last few years as shown in the table above. The remarkable consistency stands out, as the dividend growth rate has always been between 7% and 9%. Given the fact that the company has a stated dividend payout policy of 80% and its consistency, let’s assume a dividend growth rate of 7.50% for the next five years. The yield on cost will grow up to 5.30%. This isn’t too bad considering the stability this stock brings into a portfolio. Also, keep in mind that a yield level that is built up steadily is much more reliable than a high-flying yield that might not be supported properly by a company’s earnings. Altria reported EPS of $2.79 over the trailing twelve months [TTM], excluding special charges. Analysts are expecting earnings to grow at a remarkable 8%/yr for the next five years. Being the steady player that it is, Altria’s quarterly reports almost always match the expectations. Hence, it is reasonably safe to use the expected earnings for our projections here. The table below shows that buying here at $64 means that the forward multiple is almost always in the mid to low teens. Not a bad deal for a reliable player. Not to get repetitive but price and value are two different things. Enterprise values are best projected over the long-term and not just by looking at the current price. This task gets easier when the company’s earnings are relatively stable and easy to project as in the case of Altria. Let us do this two different ways. One using the projected EPS and one using the project annual dividend per share. If a stock reaches a new high, does that make it a sell? If a stock is a little overvalued, does that make it a sell too? We don’t believe so, especially if the stock is a stalwart, the multiple isn’t obscene, and the reason for buying the stock still holds true. If the (unlikely) reason you bought Altria was to make a few quick bucks, then by all means sell. If not, stay the course and collect the dividends. If you are looking at initiating a new position in Altria, buy a little and average up or down depending on how things go. In a few years, it’s hard to see that position being underwater overall as explained above. At the end of the day, most investors will stay invested at least to keep up with inflation. If you are in fact worried about the market tipping over, what better stock to own than this perennial cash machine. Source.