Mo Logo
Source: Altria.

For investors looking for consistency, Altria Group (NYSE:MO) has been among the best picks for long-term portfolios. Despite all the challenges the tobacco giant has faced, Altria has provided solid returns while avoiding much of the volatility that other industry players have endured. Altria climbed to new highs even as the stock market hiccuped recently, and many investors want to know if the company's good times can continue. Let's look at three key reasons why Altria could keep climbing even from its current heights.

1. Altria's dividends remain strong.
One of the most important elements of Altria's long-term success has been its dividend. During the years in which the threat of tobacco litigation loomed large over the company, Altria sported dividend yields that at times approached 10%, compensating investors who took the massive risks involved in owning the stock. Since the company's successful defense against potential product liability claims, Altria has seen its share price soar; even though its dividend yield has fallen, Altria still ranks among the best-yielding stocks in the market.

MO Dividend Chart

MO Dividend data by YCharts.

Some dividend investors have worried that Altria's long-term ability to maintain its payout could be in jeopardy if cigarette sales volumes continue to drop. Yet so far, Altria has done a good job of maintaining pricing power in light of falling volumes, helping to cushion the blow to its overall revenue. Moreover, its free cash flow provides a sufficient margin of safety over its current dividend payout to give investors confidence about its ability to continue rewarding its shareholders well into the future.

 2. Altria is rapidly expanding its tobacco-alternative business.
Altria investors have worried about the lead that rival Lorillard (NYSE:LO) had in developing its blu eCigs line of electronic cigarette products. Those worries motivated Altria to work harder on its own entry into the tobacco-alternative business, with the rollout of its MarkTen brand of e-cigarettes continuing during the current quarter. In addition, Altria brought the Green Smoke e-cig brand into its stable to broaden its product lineup.

Mo Markten
Source: Altria.

At this point, with Lorillard slated to sell of blu if its merger with Reynolds American (NYSE:RAI) goes as planned, Altria should not face a major competitive disadvantage for long in the vapor and e-cigarette lines. Given the uncertainties involved with possible future regulation of vapor products, e-cigarettes, and other tobacco alternatives, Altria has to be careful with the pace of its expansion, yet still not allow its rivals to gain momentum in the key area at its expense.

3. Altria has become more efficient.
In the face of a declining core cigarette business, Altria has had to make painful moves to keep its overall financial condition healthy. Yet the company hasn't hesitated to make those moves in recent years, and they have paid off for investors by helping to maintain profitability.

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Source: Nikita2706 via Wikimedia Commons.

For instance, three years ago, Altria announced that it would make major layoffs in order to reduce expenses by as much as $400 million annually. By cutting its workforce by about 1,000 workers, or 10%, Altria has improved its margins and preserved the stability of its cigarette business even as volumes have dropped.

That efficiency has been vital for Altria. The company has done a good job of keeping its prices high, but Altria can only go so far before its customer base feels the pinch from excessive costs. By cutting more from the expense side of its financials, Altria puts itself the best position possible to deliver the shareholder-friendly results that long-term investors take for granted.

Altria faces plenty of challenges as the tobacco industry evolves. With a long history of overcoming adversity, however, investors should have confidence that Altria will find ways to move forward and produce the strong profits that could push the stock price even higher in the long run.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.