There are two extreme camps of Altria’s (MO) future prospects. One of the camps is the bullish one which claims that Altria is a near monopoly, which has a 50.40% of the US cigarettes market and has nothing else to do with its cash than to distribute it back to shareholders in the form of dividends or share buybacks.

Given the fact that MO is not a growth company, the stock is spotting a P/E of 11 and a generous dividend yield of 7.8%. Some of Altria’s biggest fans also like to add that the company has increased its dividends for 42 consecutive years. Given the fact that 97% of stocks returns since 1871 have come from reinvested dividends, it is not surprise that this dividend growth tobacco stock was the best performer in the S&P 500 for the 50-year period from 1957 to 2007.

Even though tobacco sales are decreasing, most cigarette manufacturers could afford to offset sales declines by boosting price tags for its products. Since advertising tobacco products is illegal in the US, it would be almost impossible for newcomers to compete against Altria and erode its market share.

Another important asset that the US based Altria owns is a 28.5% interest in UK based SAB Miller, which is not only one of the largest brewers in the world, but also one of the largest bottlers of Coca Cola products worldwide. Altria’s stake is worth about 4.26 billion dollars per the company’s balance sheet as of 12/31/2008.

The Altria bears cite several reasons why one should not own stock in this tobacco giant. First of all the Altria that was the best performer in the S&P 500 is much different than todays Altria. The company spun out Kraft Foods in 2007 and Phillip Morris International in 2008. Without the growth of the international tobacco markets in the emerging market economies where Phillip Morris International has a dominant role and a lower probability of lawsuits, Altria is stuck with the US market, which is in a decline.

Another reason that Altria bears cite is that the integration of UST might cause liquidity problems for the tobacco conglomerate. Historically, the stocks stop increasing their payments to shareholders because they are saddled with debt after acquisitions in their field. Altria financed its UST acquisition by a bridge loan for 4.3 billion as well as a 6.8 bln in loans with maturities varying from 18 months to 30 years and coupons ranging from 7.125% to 9.95%.