If you don't look under the hood, Altria (MO 0.60%) appears to be a very compelling investment. It operates in the consumer staples sector, it has a very large 7.2% yield, and the dividend has been increased regularly for years.
Before you jump on the stock, thinking you've set yourself up for a lifetime of reliable dividend income, lift up the covers and take a closer look at the business that backs the dividend.
Here's why you might not like what you see.
Image source: Getty Images.
Not your typical consumer staple item
Consumer staples companies produce products that are purchased regularly, regardless of the market or economic environment, and typically have a modest cost. Brand loyalty is often a significant factor in this space as well. All these factors work in favor of Altria's most important offering: Smokable tobacco products, such as cigarettes. Taken as a group, smokeable tobacco accounts for a huge 88% of the company's top line.
Most consumer staples products are necessity items, like food, toilet paper, and toothpaste. You most certainly need to buy these items regularly. Tobacco isn't a necessity. It is a consumer staple largely because of the addictive nature of nicotine, which keeps buyers coming back for more. Unlike makers of deodorant and similar products, tobacco stocks are really sin stocks. That's important because Altria's smokable products group has been in decline for years as cigarette smoking has increasingly fallen out of favor with consumers.
In the third quarter of 2025, volume in the business dropped 8%. Through the first nine months of the year, volume was off by 10.3%. In 2024, volumes declined 10%. In 2023, volumes fell 9.6%. That is a terrible trend that should be a warning sign to anyone who owns or is thinking about owning tobacco-focused Altria. Most investors would be running for the hills if this were a company that produced food.
The numbers add up, but only because of Altria's buybacks
Given that backdrop, it should come as little surprise that the top line of Altria's income statement fell 3% in Q3 2025, while it was down roughly 3.4% through the first nine months of the year. What might be confusing is that the company's adjusted earnings rose 3.6% and 5.9%, respectively, over those same time periods.
There are two things to monitor here. First, the volume decline didn't lead to as material a revenue decline as you might expect. That's because the addictive nature of nicotine has allowed Altria and its peers to jack up the price of their smokes on a regular basis. For a long time, the additional revenue from price hikes more than offset the effect from volume declines, but that is now ancient history. Price hikes now appear to be a part of the volume problem.
NYSE: MO
Key Data Points
The second issue to consider is earnings, which rose despite the drop on the top line. That was largely thanks to the company's stock buybacks. In Q3 2025, Altria repurchased 1.9 million shares, bringing the total to 12.3 million shares over the first nine months of the year. Year over year, the company's share count fell 1.4% in Q3 and 2.4% through the first three quarters.
To be fair, the company's cost-cutting efforts have also helped support the bottom line. However, the big-picture story remains the same. Altria's most significant business is under severe pressure, which is having an increasingly negative effect on the company's financial results. Since the volume decline in smokable products is unlikely to change direction, buying Altria is, effectively, buying a business that's in decline.
The future could be brighter than it seems today
Despite a lofty yield and strong dividend history, most conservative dividend investors will probably be better off avoiding Altria. In fact, if you buy Altria, you are really betting that management can milk the dying smokable tobacco business long enough to fund the buildout of divisions capable of offsetting the ongoing declines.
That might happen, but so far, Altria's efforts have been less than impressive, with failed efforts in vaping and marijuana that cost investors billions in write-offs. The risk-reward balance for this high-yield stock is currently tilted in the wrong direction for long-term investors.
