In what has become an annual ritual spanning over half a century, Altria Group (MO -0.37%) recently declared a dividend raise. 

Investors, particularly those who have a hankering for high-yield dividend stocks, have more than enough time to take advantage of the increase. The question is, though: Is the stock worth buying?

54 years and counting

Altria's 2023 edition of its regular quarterly dividend raise is a slightly more than 4% boost to $0.98 per share. This is to be handed out on Oct. 10 to investors of record as of Sept. 15, and the new amount would yield a relatively very rich 8.9%. The raise maintains the company's status as a Dividend King, as it's now enacted hikes for 54 years in a row.

Cigarette companies have long been generous dividend payers, as they typically have both the means and incentive to do so. The means come from their status as very strong cash generators -- their main product, after all, requires little to no innovation or modification. As for incentive, since cigarettes are very damaging to health and the Altrias of this world are thus "sin stocks," it helps to entice investors with fat payouts.

Altria's top brass is well aware of this dynamic, thank you very much. At the company's latest investor day, management confidently indicated it would target continued dividend raises in the mid-single-digit range. Perhaps, though, that's more hype and hope than a realistically achievable goal.

After all, Altria -- and other cigarette makers like its onetime stablemate Philip Morris -- have been hit with the long-tail decline of smoking as a habit. And with such a singular product, it's been tough to find a replacement. Yes, e-cigarettes enjoy a degree of popularity, but all in all the world is moving away from any type of tobacco consumption. 

Unhappily for Altria, this shift is especially pronounced in its home market of the U.S. Since the early 1980s, cigarette sales there have declined precipitously. According to Federal Trade Commission data compiled by Statista, in 1980 just over 628 billion cigarettes were sold; in 2021, following four decades of more or less steady and pronounced declines, that tally was barely over 190 billion.

21st century consumption

Altria is certainly making an admirable effort to modernize its product lineup. After its investment in 35% of e-cigarette maker Juul Labs went south, the clearly undaunted company bought another vape maker earlier this year. This is NJOY Holdings, which it purchased for $2.75 billion in cash in March.

But the best days for the e-cigarette market might be in the past. During the coronavirus pandemic's height, monthly consumption increased notably, according to data compiled by the government's Centers for Disease Control and Prevention (CDC). This is not surprising, because bored people tend to consume more tobacco.

Starting from mid-2022, however, consumption began to decline on a year-over-year basis. While cigarette companies have concentrated much of their marketing firepower on such products, it feels like they're not finding fresh customers. It doesn't seem as if a surge is about to occur.

Altria's fundamentals reflect the fading popularity of tobacco. In the first half of this year, its net revenue slumped by nearly 2% when compared to the same period of 2022. Generally speaking, the top line hasn't really moved much; on an annual basis it declined last year (by 2%), and since 2018, it has moved in a relatively tight range of $19.6 billion to $21.1 billion.

It's much the same for free cash flow; this also slumped last year, and -- with the exception of 2019, when it dived down to under $7.6 billion -- hasn't been able to escape a narrow band (of just over $8 billion to slightly more than $8.2 billion).

Those constant dividend raises are burning off more green, meanwhile, with the cash dividend payout ratio approaching 82% these days. In decades past, this metric typically didn't top 60%.

The poster child for secular decline

It doesn't matter how talented a company's management team is, or how effective its marketing effort is, if its country and the world is becoming less interested in the products. Altria, Philip Morris, and the other cigarette industry diehards will continue to sling tobacco, not least because it's extremely profitable. But profitability isn't everything, and it's ultimately not much of a draw if the core business is withering.

While Altria plays skillfully with the cards it's been dealt, I don't see it as being a long-term winner. I don't find the chunky dividend sufficiently attractive either -- there are other high-yield stocks on the exchange with brighter futures. While there's time to jump on the company's latest dividend raise, I think investors would be better served parking their capital elsewhere.