For dividend investors, Verizon Communications (NYSE:VZ) and Altria Group (NYSE:MO) are both high-yielding stocks that have produced substantial growth over time. Yet both Verizon and Altria are dealing with challenges in their businesses, and each must consider dramatic action in order to make sure that they can sustain long-term growth and support their dividends. In looking for the best dividend stocks in the market, investors want to know whether Verizon or Altria is a smarter pick right now. Comparing the two stocks using some common benchmarks could give you the answers you're looking to find.

Stock performance and valuation

Altria and Verizon have seen their shares go in different directions over the past 12 months. Since May 2016, Altria has produced a 17% rise in its share price. Verizon, however, has fallen 9% in the same timeframe.

In assessing their respective valuations, it's important to make sure you're considering numbers that are fair. If you look solely at what the two companies have earned in the past year, then Altria looks like it's the cheaper stock. The tobacco giant's earnings multiple is just 10, compared to 15 for Verizon. However, Altria's earnings are inflated based on its recent sale of shares of beer maker SABMiller.

Looking at valuations based on future profit expectations paints a different picture. Currently, Verizon carries a forward earnings multiple of just 12. That's far less than Altria's corresponding figure of 21. Based on these numbers, Verizon looks like the better value after its recent drop.

Verizon board of directors and logo.

Image source: Verizon.

Dividends

With respect to dividends, Verizon has a key advantage. The stock currently yields more than 5%, which dramatically outpaces the 3.4% yield that Altria has right now.

Both Verizon and Altria appear to have sustainable dividend payouts at current levels. Steadily, Verizon's payout ratio as a percentage of earnings has climbed over time, while Altria has generally stayed stable when you ignore one-time impacts like the gains from the SABMiller merger. At current levels, the two dividend stocks pay similar proportions of their bottom line to shareholders.

However, Altria has a better track record of growing its dividend. Altria gave investors an 8% increase in its dividend payout recently, while Verizon made a much more modest 2% raise. For growth, that gives Altria an edge, but it needs to catch up in order to make up for Verizon's much larger yield.

Growth and fundamentals

Verizon and Altria are both mature companies, and they've each had to deal with the challenges that being in a leadership position entails. Verizon has had to deal with price wars among its wireless carrier peers, and it has had to jump on opportunities to find growth. For instance, the recent bidding war for spectrum asset owner Straight Path Communications (NYSEMKT:STRP) led Verizon to bid more than five times what the stock fetched as recently as April. At stake is the ability to deliver on the promise of a 5G network, and Verizon has made its case that network quality is worth paying a premium over what discount carriers charge their customers. In order to make good on that promise, Verizon can't afford to skimp on chances to get an edge, and so investors need to be prepared for more outlandish-looking strategic moves that make sense in the broader context of competition.

Altria is also trying to beat back difficult conditions in its industry, much of which stems from the inexorable decline in cigarette volume that has continued for years. So far, Altria has been able to grow by ensuring that it raises prices enough to offset the loss in volume, but some fear that there's a limit to such measures over the long run. That's a big reason why more of those who follow Altria and other tobacco companies are looking closely at e-cigarettes, heated tobacco products, and other reduced-risk products. Altria hasn't come out and said that it expects such products to replace traditional cigarettes in the near future, but it has spent a reasonable amount of money on research and development in efforts to advance the nontraditional side of the business. Without progress on that front, Altria could eventually run out of ways to support its core tobacco business.

Verizon's valuation, dividend yield, and growth prospects make it a slight favorite over Altria at current prices. In the long run, though, both Altria and Verizon have the potential to remain leaders in the corporate world. By focusing on their respective opportunities, Verizon and Altria can both deliver solid returns to their shareholders over time.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool has a disclosure policy.