If you are considering Altria (MO +2.08%), you're likely drawn to the stock because of its lofty 7.7% dividend yield. The dividend backing this well-above market yield has been trending higher over time, making it appear to be an attractive dividend investment.
There's just one big problem: The business backing the dividend is struggling.
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Altria's core problem is volume
Investors considering Altria must look past the spin and focus on the numbers to truly understand the business. For example, in the third quarter of 2025, the company generated roughly $6.1 billion in revenues at the top of its income statement. Of that total, the company's smokable tobacco business contributed roughly $5.4 billion. That's just shy of 90% of the company's revenues.
Smokable tobacco products is a fairly wide category, including items such as pipe tobacco and cigars. In Altria's case, however, the most important product is very clearly cigarettes. The company's portfolio of premium and discount cigarette brands accounted for 97% of its volume in the smokable tobacco segment of the business.
The company's cigarette volumes have been declining for years, with a year-over-year drop of 8.2% in the third quarter of 2025. Through the first nine months of 2025, the drop was 10.6%. Altria has been using price increases to offset the impact of volume declines.
The volume declines Altria is dealing with are the root problem that investors need to be aware of. But there's another issue that's less well known.
Altria has made misstep after misstep
Management's big goal is to ensure the long-term survival of the business. The board of directors is also meant to help guide the company toward that goal. Wall Street tends to have a short memory, so past mistakes often get forgotten very quickly. Only, in the case of Altria, those mistakes have begun to pile up even as the company tries to focus investor attention on current events.
For example, the management and board of directors decided it would be a good idea to spin off the company's foreign operations as Philip Morris International (PM +3.04%). Ultimately, foreign cigarette markets have outperformed the U.S. cigarette market. And now Philip Morris International has entered the U.S. market with smokeless nicotine products. Altria essentially relinquished its most lucrative business and, simultaneously, created a new competitor by spinning off Philip Morris International.
If that were the only strategic misstep, you could forgive it. But it isn't.
Altria was early to invest in the vape sector, putting money into Juul. That company encountered regulatory issues, and Altria subsequently exited the investment at a substantial loss. That loss turned into a one-time write-off that investors ended up shouldering. The purpose of the investment was to find a new avenue for long-term growth because of the volume declines in the company's cigarette business.
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Key Data Points
That wasn't the only bad investment. The company also invested early in the marijuana sector, putting money into Cronos Group. Like the Juul investment, Altria ended up exiting Cronos at a steep loss. And like Juul, there were large charges that fell on shareholders. Clearly, Altria didn't find the solution to its cigarette problem with this investment, either.
The most recent effort to spur long-term growth is again in the vaping space. Altria acquired Njoy, which soon became embroiled in a lawsuit with Juul. The investment in Njoy could still yield a positive outcome, but the legal issues it faces are a notable setback. And that highlights the somewhat questionable strategic decisions that Altria has made over time, even as the company attempts to focus investors' attention on the near-term success of the company's still-small smoke-free business.
Altria doesn't have a great history
One of the most important things a CEO and the board of directors can do is allocate a company's capital. At this point, Altria doesn't have a great track record on that front. This is a fact that's often overlooked because investors typically focus on what is happening today and what might happen in the future.
While a forward-looking focus makes sense, in Altria's case, a little of the often-forgotten Wall Street history highlights the long-term risk that investors face from its steadily declining cigarette business. When you consider the full picture, conservative dividend investors might reasonably conclude that the substantial dividend yield Altria is offering may not be as safe as it appears.
