From the DividendInvestor news file for the past week:

JP Morgan JPM officially declared a new dividend rate of $1.05 per quarter. This represents a raise of 5.0% over the prior rate. Shares of the country’s largest bank now yield 2.9%. Texas Instruments TXN announced a dividend raise of 4.8% to a new payout of $1.30 per quarter. Shares of the semiconductor firm now yield 3.2%. Starbucks SBUX announced a dividend raise of 7.5% to a new payout of $0.57 per quarter. Shares of the coffee chain giant now yield 2.4%.

Please see new analyst notes below from Morningstar Research Services for Altria MO, Philip Morris PM and United Parcel Service UPS.

Best wishes,

Peggy Seemann
Publisher, Morningstar DividendInvestor

News and Research for Dividend Select Portfolio Holdings

Altria Taking a Multipronged Approach To U.S. Nicotine Market
by Philip Gorham, FRM | Morningstar Research Services LLC | 09-19-23

Altria reported second-quarter results that were a whisker below our forecasts, while margins improved slightly, representing a decent performance in light of tighter tobacco regulation in the United States and increasingly challenging macroeconomic conditions. The headline numbers of revenue net of excise tax up 1.5% year over year and earnings per share growth of 4% are representative of what we believe Altria can deliver in the medium term, and we are retaining our $52 per share fair value estimate and our wide moat rating. The current market price offers moderate upside to our valuation, and we think Altria could provide a fairly attractive defensive holding, paying a dividend yield of 8%, although the concentration in the U.S. market may increase risk and volatility relative to competitors such as Philip Morris International and British American Tobacco.

Second-quarter net revenue increased by 1.2% year over year, a sequential improvement from the modest decline in the first quarter. As usual, this was driven by price increases, and volume was again weak. In this vein, cigarette volume fell by 8.7% in the second quarter, with the discount segment particularly weak, down 24.4%. These figures were slightly better than those of the first quarter, despite the flavor ban in California coming into effect. We expect this will have slight drag on volume throughout the rest of the year, but on the evidence of the second quarter, it will not throw volume too far off its recent trend. The sharp decline in the discount segment appears to be an industrywide trend and indicates that low-income consumers are quitting cigarettes at faster rates than higher-income consumers are trading down.

Swedish Match Should Provide PMI With a Distribution Platform for iQOS in the U.S.
by Philip Gorham, FRM | Morningstar Research Services LLC | 09-21-23

Philip Morris International, or PMI, reported second-quarter results that were modestly above our expectations, due to robust volume in the core combustible segment. On top of low-double-digit organic net revenue growth, subsidiary Swedish Match made a significant contribution to reported year-over-year revenue growth of 1.5%. We are retaining our $103 fair value estimate and wide moat rating. PMI is trading close to this valuation, and we believe a more attractive risk/return profile exists in some of the slightly-lower-quality tobacco companies such as Imperial Brands and British American Tobacco, but these results again confirm that PMI's valuation premium to peers is justified, and PMI may prove to be more defensive than most in the event of global macroeconomic deterioration.

PMI's second-quarter organic revenue growth of 10.5% was driven by a 9% pricing increase and 26.6% growth in heated tobacco unit volume, with this unit now representing 13% of total tobacco volume. This was supported by a lower-than-expected combustible volume decline of just 0.4%. Management believes industry volume in its footprint declined by 2.1% in the second quarter, implying some share gains, but the company's volume decline may reaccelerate later in the year. Nevertheless, this was a respectable quarter, given the rising pressure on consumers in most markets.

Swedish Match made a strong start under the ownership of PMI, and the acquisition was accretive to reported growth. On a pro forma basis, oral product shipment volume (primarily Swedish Match's Zyn brand) increased 13.8%, most likely boosted by greater distribution on the PMI platform, but also indicative of the ongoing growth of the category. In our opinion, PMI has the strongest portfolio of noncigarette brands, with Zyn in oral tobacco and iQOS in heated tobacco, and this should help it manage the impact of volume decline in cigarettes.

Domestic Package Diversions and Costly Union Contract to Strain UPS' Near-Term Results
by Matthew Young | Morningstar Research Services LLC | 09-22-23

UPS' second-quarter top line fell 11% year over year (removing foreign exchange); below our forecast, largely from lost U.S. domestic package volumes as shippers diverted freight ahead of a threatened Teamsters strike. Relative to second-quarter 2022, the revenue decline stems from lower overall package volumes, rate and demand normalization for the truck brokerage and global forwarding operations, and now-falling fuel surcharges. That said, core pricing remains positive, which we expect to persist.

Total average daily package volume declined 9% on domestic U.S. package diversions (reflecting shipper concern over union negotiations), retailer inventory destocking, soft U.S. industrial production, and less-robust macroeconomic conditions across Europe. On the positive side, our 2024 volume forecasts will likely assume UPS can regain a large swath of diverted package volumes in the year ahead given that a new labor agreement was secured in July.

Not surprisingly, total adjusted operating margin contracted year over year on lost operating leverage, though adjusted U.S. domestic margin exceeded our forecast on solid cost execution. However, full-year domestic margin guidance of 10% came in worse than we anticipated as a result of the newly secured union agreement, which will yield higher-than-expected wage inflation.

We will be lowering our 2023 U.S. domestic margin forecast by about 100 basis points to account for higher wage inflation and lost volumes, though we have confidence that network adjustments, core pricing gains, and volume recovery will help provide a material offset in the years ahead. Thus, we don't expect to temper our 2024 and 2025 margin forecasts as much. Our model adjustments will likely have a slight downward impact on our $177 fair value estimate, but we expect much of that to be offset by the time value of money. The shares look appropriately valued relative to our longer-term free cash flow growth assumptions.

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Peggy Seemann does not own stocks from the Dividend Select Portfolios in her personal accounts.