The smoking rate among adults in the United States has declined by 77% over the past six decades. Yet Altria Group (MO +0.41%), the company that sells Marlboro cigarettes and John Middleton cigars in America, continues to grow its bottom line.
The company's sustained success has made the stock a Dividend King with over 50 years of uninterrupted dividend growth. How? Altria's smokable products have remarkable pricing power, which has allowed it to offset steady volume declines and deliver continuously higher profits.
But as the saying goes, nothing lasts forever. It turns out, there is a looming threat on the horizon. Here is what investors need to know.
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Smokable products continue to drive Altria's dividend
This is how much operating income Altria's various product segments generated in 2025:
- Smokable products: $10.98 billion profit
- Oral tobacco products: $1.82 billion profit
- E-vapor products: $2.29 billion loss due to an impairment charge
- All others: $229 million loss
These numbers highlight just how much Altria still leans on its legacy smokable products.
It's not for lack of trying, though. Altria has struggled to diversify. It infamously wasted billions of dollars on a stake in Juul. Then it acquired Njoy, only for a patent lawsuit to force its products off the market. Its nicotine pouch brand (On!) has been successful, but it still doesn't move the needle enough.
Even after decades of dividend hikes amid declining smokable product volumes, Altria's dividend remains financially sound today. It accounted for approximately 77% of its free cash flow in 2025. There's enough breathing room there to buy Altria time to continue efforts to nurture new revenue streams.
NYSE: MO
Key Data Points
Competition brewing from a familiar name
Altria needs to really make strides over the next four to five years. Otherwise the pressure could begin to rise. Philip Morris International, which has long operated outside the United States, has entered the domestic market. In late 2022, it acquired Swedish Match, the parent company of the leading U.S. nicotine pouch brand, Zyn.
But IQOS is what should keep Altria up at night. Philip Morris launched IQOS in 2014 as the first heat-not-burn product, which closely replicates the smoking experience. It has been a huge success, converting over 22 million smokers worldwide.
Philip Morris has rolled out IQOS very carefully in the United States since initially receiving FDA approval in late 2019. The pace will likely pick up as the company aims to reach 10% of the U.S. cigarette and heated tobacco market. If successful, IQOS could accelerate Altria's smokable declines to the point that price increases alone can't make up for them.
It's too soon to panic. That said, investors will want to closely follow how Altria moves to diversify its business over the next few years.
