Altria Group (MO -0.38%) shares have been beaten down recently because of a downgrade from Morgan Stanley. However, the company remains profitable and financially stable. But even with its dividend hovering around a suspiciously high 7.3%, the company boasts several key strengths that position it well to keep up those payouts for the forseeable future. 

Altria: Kings in the tobacco space

Altria maintains a strong competitive advantage in the cigarette space. Its Marlboro brand has been the top-selling cigarette brand for 45 years. Currently, 90% of Altria's revenues come from tobacco products, but it's also pursuing alternative nicotine products to offset the decline in tobacco usage. It owns equity stakes in Juul (vaping) and Cronos (cannabis) (CRON), as well as a 10% stake in Anheuser Busch InBev (BUD -1.29%) that's worth roughly $11 billion.

Altria has been seemingly slow to move in its transition to smokeless tobacco products, despite its competitive advantage in cigarettes and its tag line of "Moving Beyond Smoking." That aside, the company does have a plan to transition to a smoke-free future by 2030; at the moment, those efforts primarily rely on distribution agreements or equity ownership. Altria has been making progress on this front: Its U.S. Smokeless Tobacco Company is the most profitable in the moist smokeless varieties, anchored by the Copenhagen snuff brand.

Altria has had the right to sell the IQOS smokeless product in the U.S., but the brand is owned by rival Philip Morris International (PM 0.47%), who could pull away from the distribution deal at any time. Indeed, Altria management made its 2022 projections with the assumption that it would no longer be distributing IQOS. Plus, PM has recently acquired Swedish Match (SWMAF), which manufactures the Zyn oral nicotine pouches and controls 64% of that market in the U.S.

Altria has the On! brand of oral nicotine pouches, and it's been growing those products' distribution, increasing to over 100,000 stores that cover over 80% of total U.S. oral tobacco volume. 

Altria: Kings in the dividend space

Altria occupies an exclusive group of dividend stocks called Dividend Kings. These S&P 500 companies have increased their annual dividends for over 50 years, and there are only 39 stocks that qualify. It's not impossible for those dividends to stop, but it isn't very likely. The company continues to generate solid free cash flow capable of covering the dividend, and it's still growing even as it continues its slow transition away from tobacco products -- a shift expected to continue over the coming decade.

Altria has over $21 billion in annual revenue, and it turns and impressive 39% ($8.2 billion) of that into free cash flow. That strong cash flow is important in maintaining, and increasing, dividend payouts.

Altria has a history of paying cash dividends; in 2021, it devoted 78% of adjusted diluted earnings per share to funding its dividend. While that's a high dividend payout ratio, Altria's strong cash flow should help it maintain those payments.

Should Altria have a throne in your portfolio?

Altria remains the leading tobacco company in the U.S, and that doesn't look likely to change anytime soon. With its knowledge and expertise, it is transitioning -- however gradually -- to smokeless tobacco products. Keeping an eye on growth in the smokeless side of Altria's business, as well as trends in cigarette sales, could be the key to determining the future profitability of the firm.

It is worth noting that cigarette sales increased slightly in 2020, and even throughout the periods of decline, Altria has maintained its profitability and free cash flow. Even if cigarette sales decline over the coming decade, cigarettes won't be going away anytime soon, and Altria has proven it can maintain its growth through its market dominance, cost-cutting, and transition to new products.  As a mature business, Altria's earnings growth won't set the market ablaze, but its expected 4%-7% growth in adjusted diluted earnings per share is satisfactory for an income-producing dividend stock. With its commitment to distributing 80% of adjusted diluted earnings as dividends, Altria should maintain its status as a dividend king for years to come.