Altria Group (NYSE:MO), the largest tobacco company in the U.S., is a favorite dividend stock for many income investors, thanks to its forward annual dividend of 4.2%.

However, many investors are probably wondering if declining smoking rates, rising excise taxes, increased regulations, and the uncertain future of e-cigarettes will weigh down its earnings and disrupt its dividend. Looking ahead, let's look at four key benchmarks for Altria's dividend, and what they tell us about its future.

1. Historical dividend growth
Altria isn't considered an elite "dividend aristocrat," which is defined as a company that has raised its dividend annually for more than 25 years. That's because Altria's spinoffs of its position in Kraft Foods (UNKNOWN:KRFT.DL) and Philip Morris International (NYSE:PM) caused dips in its recorded dividends. However, Altria shareholders received shares of both companies, which subsequently paid out their own dividends. After those spinoffs, Altria has raised its dividend every year since 2008.

MO Dividends Paid (TTM) Chart

MO Dividends Paid (TTM) data by YCharts

2. Payout ratios
A common gauge for a company's generosity and dividend sustainability is its payout ratio, or the percentage of its earnings paid out to shareholders. Over the past 12 months, Altria paid out 88.5% of its net income back to shareholders, according to S&P Capital IQ. Aside from some volatility during the Kraft and Philip Morris International spinoffs, Altria's payout ratio has remained relatively stable between 75% and 95% over the past four years, according to the same source.

MO Payout Ratio (TTM) Chart

MO Payout Ratio (TTM) data by YCharts

A payout ratio of 100% is considered unsustainable and a major red flag for a dividend cut. But at the same time, a lower payout ratio indicates that a company has more room to grow its dividend. Altria's biggest domestic rival, Reynolds American (NYSE:RAI), sports a similar trailing 12-month payout ratio of 86.5%, so both are evenly matched when it comes to generosity and dividend growth potential.

3. Revenue and earnings growth
A major concern regarding Altria and Reynolds American is their ability to generate top line growth in an increasingly tough market for U.S.-bound tobacco makers. The smoking rate among American adults declined from 42% in 1965 to 18% in 2012, according to the Surgeon General's Report on Smoking and Health. Meanwhile, federal and state excise taxes on cigarettes were raised over 120 times between 2000 and 2013. Between fiscal 2003 and 2013, Altria's cigarette shipment volumes declined 31% from 187.2 billion to 129.3 billion.

Altria offset that decline and shielded its bottom line by raising prices, cutting jobs, and diversifying into non-smoking products like snuff, wine, and e-cigarettes. As a result, Altria's annual revenue actually rose 4% between fiscal 2009 and 2013, while net earnings soared 41%.

4. The bottom-line balancing act
Altria's ability to grow its top and bottom lines as demand for its core product wanes is encouraging, but it requires a delicate balancing act of further raising cigarette prices and a deeper expansion into smokeless products, which accounted for only 9.8% of its top line in fiscal 2013.

I'm fairly confident that Altria can keep raising cigarette prices for several years to offset declining volumes. That's because one pack of cigarettes, at an average price of $6.36 (taxes included) costs the average American just 0.14% of his or her average monthly income. By comparison, smokers in the U.K. must spend a whopping $10.99, or 0.32% of their average monthly income, on a pack of cigarettes. Yet smoking rates in the U.S. and the U.K. are nearly identical, at 18% and 19%, respectively. Those numbers indicate that Altria could probably nearly double cigarette prices from current levels to keep offsetting shipment declines.

As for Altria's MarkTen and Green Smoke e-cigarettes, the fledgling market remains vulnerable to regulations, taxes, and custom "vape shops," but they could possibly generate meaningful revenue for the company in the future. For now, however, e-cigs remain wild cards which shouldn't be considered viable replacements for traditional cigarettes.

Altria's MarkTen e-cigs. Source: Altria.

The verdict
In closing, Altria's dividend looks safe -- its payout ratio is consistent, generous, and stable, while its bottom line is well insulated by cost reductions and price increases. The only thing investors should watch out for is Altria's valuation -- its trailing P/E of 23 represents an all-time high for the company, which means that a pullback might be overdue.