Dividend yield is an interesting metric. The math is very simple, but what you can learn from yields is often material. One lesson that long-term dividend investors will quickly learn is that the stock with the highest yield isn't always the best investment opportunity.
If you are looking at Altria (MO 0.24%) and its 7.3% yield, you might be better off buying Target (TGT +2.19%) and its 4.5% yield. Here's why.
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What's the problem with Altria?
Altria's primary business is producing smokable tobacco products, which account for nearly 90% of the company's revenue. Cigarettes make up the vast majority of its smokeable products, at 97% of its volume. This is important for investors to understand.
The reason it is such a problem is that cigarette volumes fell 8.2% year over year in the third quarter of 2025. The company's most important brand, Marlboro, experienced a 11.7% decline in volume. Marlboro accounts for 85% of Altria's overall cigarette volume.
This isn't a one-time issue; volumes have been falling for years. It is just the continuation of a long-term trend as smoking falls out of favor and smoking alternatives, such as vaping and pouches, gain adherents.
NYSE: MO
Key Data Points
Altria hasn't been navigating the industry's changes as well as its peers. In fact, Altria was an early investor in vapes and marijuana, but both investments flamed out. Shareholders lost billions thanks to massive asset write-downs. And the declines in its most important business continued.
It is trying again in the vape space, but given the history here, most investors should probably tread with extreme caution. If Altria can't find a replacement for cigarettes quickly enough, the bad news is likely to persist.
Target's customers are looking for bargains
Target's major issue today is that the retailer's market approach is out of sync with current consumer buying trends. Target attempts to provide customers with a more upscale shopping experience and a range of premium products. Currently, however, consumers are concerned about their finances and are tightening their budgets.
Companies that focus on simply offering low prices are winning customers, while Target's premium approach is losing customers. To put a number on that, Target's same-store sales fell 2.7% in the third quarter of 2025, with overall sales off by 1.5%. That's not good, but it isn't shocking given the retail environment.
NYSE: TGT
Key Data Points
This weak patch is also fairly normal in the retail sector, as consumers frequently swing between seeking bargains and being willing to splurge on quality and service. It is not an existential threat to Target's business.
Meanwhile, Target's board of directors and management are already working to realign the company's approach so it better serves customers. Significant changes include the appointment of a new CEO and a shift to a team-based approach to strategy. It is highly likely that Target, which is a Dividend King with more than five decades of annual dividend increases behind it, will manage to muddle through to better days.
Which is the better stock to buy: Target or Altria?
Could Altria turn its business around? Sure, but it has been trying for years at this point and hasn't figured out how to do it. And that makes its huge 7.3% dividend yield very risky for long-term investors, given the ongoing declines in its most important business.
By comparison, Target's 4.5% yield looks far more attractive, noting that it also comes along with a roughly 55% dividend payout ratio (Altria's payout ratio is nearly 80%). Target has plenty of leeway for adversity before a cut would be in the cards, which adds to the allure of what appears likely to be a temporarily struggling business.
