The big reason to buy Altria's (MO 0.68%) stock is its lofty 6.9% dividend yield. For comparison, stocks in the S&P 500 are only yielding an average of 1.3% and the average consumer staples stock's yield is just 2.5%, or so.
But is Altria's huge yield enough to make the stock worth buying? Read this before you jump aboard.
What does Altria do?
Altria's primary business is selling nicotine products, with cigarettes making up the lion's share of its revenue. Although hardly a life necessity, nicotine has addictive properties, so consumers who use the substance tend to keep buying their chosen delivery method in both good economic periods and bad ones. Thus, Altria falls into the consumer staples sector.
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Consumer staples makers are normally considered fairly safe and reliable companies because of the inherent underlying demand for their products, which include things like food, beverages, and toiletries. However, cigarettes haven't been quite as reliable lately as they had been in the past. In Altria's case, cigarette volumes fell 13.7% year over year in the first quarter of 2025. That's not a one-time event; it is the continuation of a long downward trend.
Altria isn't shoving its head in the sand and praying that things get better. It has been attempting to find a product (or products) that it can use to replace cigarettes, or at least offset the downtrend as much as possible. If you buy Altria today intending to own it for the long term, you are, effectively, betting that it succeeds in this effort. If management can't find a replacement for its cigarette business, it seems highly unlikely that it will be able to support that lofty dividend yield over the long term.
Hope springs eternal, or three strikes and you're out?
Before even stepping in the door, investors should admit to themselves that Altria is a fairly high-risk investment. But the situation looks even more dire when you start to look at the company's results as it tries to find new products with growth potential. The most recent black eye was the roughly $900 million write-down Altria took in the first quarter to reduce the carrying value of its purchase of NJOY.
The issue is complex, of course, but Altria basically lost a lawsuit over patents and was forced to stop selling certain NJOY products. The company it was fighting with was, interestingly enough, Juul. Altria had invested a material sum of money in Juul when that company was first starting to bring its products to market. And then Juul's selling efforts were severely curtailed by the U.S. government, and Altria ended up taking a multi-billion-dollar write-down and later exited the investment.
At around the same time, Altria paid billions for a stake in Cronos, a Canadian marijuana company. Cronos' stock price eventually started to crumble, and Altria eventually gave up on the idea of buying the company. Again, there were billions of dollars of write-downs involved.
At this point, Altria has taken three swings at replacing cigarettes. Each time, its efforts have cost investors dearly. The track record here is worrying, as it suggests that Altria's management team isn't executing very well at the one thing that it needs to succeed at to ensure the company, and the dividend, have a long-term future.
Altria's yield isn't likely to be worth the risk for most investors
Typically, dividend investors want to own well-run companies that have large and sustainable yields. Hopefully, the dividends backing the yield grow over time as the business backing the dividend grows. Altria has a high yield, but the business backing it is struggling. And, at this point, there doesn't appear to be a light at the end of the tunnel. Most investors will probably be better off avoiding this high-yield stock after yet another failure, as it looks to life after cigarettes.
