The alcohol, tobacco, and firearms industries often get lumped together as "sin stocks," and both American Outdoor Brands (NASDAQ:AOBC) and Altria (NYSE:MO) have delivered solid, impressive returns for longtime shareholders. However, both companies face constant challenges from opponents of their respective products, and changing trends can push their stocks in and out of favor. For investors looking at the space now, the big question is which stock makes a smarter choice. By looking at American Outdoor Brands and Altria using a number of key metrics, you'll get a better idea of which one you should look to add to your portfolio.

Valuation and stock performance

Both Altria and American Outdoor Brands have had good stock performance over the past 12 months. Altria is up 14% since June 2016, which just edges out American Outdoor Brands' 13% rise. Altria's path has been a lot smoother, though, with American Outdoor Brands having been up as much as 40% and down as much as 15% at various stretches along the way.

At first glance, the two stocks' valuations look relatively similar. Altria currently trades at about 10 times its trailing earnings over the past year, which is almost identical to American Outdoor Brands' trailing multiple. However, Altria's sale of its stake in beer giant SABMiller led to a large boost in its earnings, and that won't recur going forward.

Smith & Wesson gun.

Image source: American Outdoor Brands.

When you instead look at near-term future earnings expectations, American Outdoor Brands gains an edge. Although its earnings are also projected to fall slightly, the gun specialist's forward earnings multiple of 14 is well under the 21 times forward earnings at which Altria trades. Based on valuation, American Outdoor Brands looks like the more attractive stock.

Dividends

For dividend investors, however, there's only one real choice. Altria has a long commitment to paying dividends to its shareholders, with 50 dividend increases dating back nearly half a century and a current yield of 3.2%. The company rewarded shareholders with an 8% dividend increase late last year, and most investors expect the company to keep pushing its payback higher gradually over time.

By contrast, American Outdoor Brands doesn't pay a dividend and has no immediate plans to start doing so in the future. Instead, it has tended to favor stock buybacks in the past as a way of returning capital to shareholders, as company executives have pointed to the healthy impact on the balance sheet that comes from reducing outstanding share counts. Still, for investors who need regular income, that decision makes Altria the better choice by default.

Altria logo.

Image source: Altria.

Growth and risk factors

Both American Outdoor Brands and Altria face challenges to growth, even though they've worked hard to overcome those obstacles. For American Outdoor Brands, fears about rising gun control regulation almost disappeared overnight after the 2016 U.S. presidential election, and that actually sent the stock of the Smith & Wesson manufacturer sharply downward as investors anticipated a drop in demand. In the past, the sense of urgency that impending gun control measures have created has led to big sales spikes, but that also creates subsequent drops when regulation becomes less likely. In response, American Outdoor Brands has sought to broaden its scope, going beyond guns to add accessories like laser sights, gun safes, knives, and flashlights in order to appeal to a wider range of outdoor enthusiasts. Nevertheless, gun sales still make up a huge portion of the company's overall revenue, and American Outdoor Brands will still have to weather inevitable cycles in that business.

Altria's primary concern is the long downward trend in cigarette volume. That's continued to be a problem recently, with volumes in its most recent quarter down 2.7% from where they were just 12 months ago. Altria has been able to raise prices to keep profits rising despite the falling volume, however, and it has worked hard to implement cost containment measures in order to boost the bottom line over time. In the long run, the tobacco industry could well transform itself away from traditional cigarettes toward alternative products like e-cigarettes and heated-tobacco products, as early results from those innovations have been promising. Altria is well-positioned to take advantage of shifting consumer preferences, but given how huge the cigarette industry is as a portion of Altria's overall sales, it will have to manage the transition well in order to avoid massive disruptions to revenue and profit.

At this point, American Outdoor Brands appears to have more room to rise, with a better valuation and a clearer path toward growth. Income investors will have little choice but to go with Altria, however, and you shouldn't count out the tobacco giant's long-term prospects despite its somewhat pricey stock at current levels.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.