Altria (MO +1.81%), the top tobacco company in America, is generally a safe income play for conservative dividend investors. Its flagship Marlboro brand still controls nearly half of the retail cigarette market, and it's expanding its portfolio with more smoke-free products -- like e-cigarettes and nicotine pouches -- as adult smoking rates decline. It also constantly raises its prices, cuts costs, and buys back its shares to boost its earnings per share (EPS) as its revenue growth slows down.
Altria has increased its dividend every year since it spun off its overseas business as Philip Morris International (PM +2.28%) in 2008. It currently pays a forward yield of 7.2% and it trades at just ten times forward earnings. That high yield and low valuation should limit its downside potential even if the broader market swoons. It should also become more attractive as interest rates decline and drive more investors back toward high-dividend stocks.
Image source: Coca-Cola.
I personally own shares of Altria, and I recently called it a great defensive play in this messy market. But if you don't own Altria yet, there's another reliable blue chip dividend stock you should probably buy first: Coca-Cola (KO +0.39%). Let's see why the world's largest pure-play beverage company might be a more compelling long-term investment than the tobacco giant.
NYSE: KO
Key Data Points
Coca-Cola is more broadly diversified and growing faster
At first glance, Coca-Cola might seem to face some of the same challenges as Altria. Just as fewer adults in America are smoking cigarettes, consumers are drinking less soda worldwide.
However, over the past few decades, Coca-Cola has developed and acquired more brands of bottled water, fruit juices, teas, sports drinks, energy drinks, coffee, and even alcoholic beverages, thereby diluting the importance of its sugary flagship sodas. It also refreshed its sodas with smaller serving sizes, new flavors, and healthier versions to attract younger consumers.
That's why Coca-Cola's organic sales rose 16% in 2022, 12% in 2023, and 12% in 2024 -- even as inflation curbed consumer spending and drove up its prices. Altria's sales (net of excise taxes) declined 2% in 2022, 1% in 2023, and nearly flatlined in 2024. It still generated 87% of its sales (net of excise taxes) from its slow-growth smokeable products in 2024.
Coca-Cola operates a simpler business model
Coca-Cola only produces the concentrates and syrups for its drinks. Its vast network of independent bottling partners actually produces, distributes, and sells the finished beverages. That capital-light model allows Coca-Cola to maintain high gross margins and generate more cash for its marketing campaigns, buybacks, and dividends.
Altria manufactures its own tobacco products, and economies of scale and automation have reduced its production costs over the past decade. However, it can't pass on its operating expenses to other companies as Coca-Cola does with its bottlers. It also needs to constantly focus on cutting costs to offset its declining annual shipments of smokeable products (cigarettes and cigars) -- which plummeted from 103.45 billion sticks in 2019 to 70.34 billion sticks in 2024.
Coca-Cola's long-term outlook is more stable
From 2024 to 2027, analysts expect Coca-Cola's adjusted EPS to grow at a CAGR of 6% as Altria's adjusted EPS increases at a CAGR of 4%. At 22 times next year's earnings, Coca-Cola might seem pricier than Altria -- but its broader diversification, simpler business model, and more substantial long-term tailwinds justify that higher valuation.
Coca-Cola is a Dividend King
Coca-Cola's forward dividend yield of 2.9% is much lower than Altria's. However, it's raised its payout for 63 consecutive years -- even as the U.S. economy weathered 11 official recessions. That makes it a Dividend King, an elite company which has raised its payout for at least 50 consecutive years.
Over the past decade, Coca-Cola generated a total return of 126% after factoring in its reinvested dividends. Altria only delivered a total return of 99%, as its weaker stock price performance offset the gains from its higher dividends. While Altria's yield may seem more attractive, Coca-Cola might be better positioned to generate more stable long-term returns.
Why 2026 could be a great year for Coca-Cola's stock
The S&P 500 remains near its all-time high and appears historically expensive at 31 times earnings. The Federal Reserve will also likely cut its benchmark rates a few more times in 2026. In this environment, more investors should rotate from pricier growth stocks back toward cheaper, evergreen dividend stocks. That trend would be beneficial for blue chip stocks like Coca-Cola and Altria, but the former might be a better investment than the latter for 2026 and beyond.
