The tobacco industry may be reviled by some, but it has been a big winner for investors for much of its history. Throughout the 20th century, tobacco stocks were among the best performers, benefiting from an addictive, highly profitable, recession-proof product, plus a reputation for offering generous dividend yields to investors.
According to Wharton professor Jeremy Siegel, Altria Group (MO 0.4%), the domestic maker of the Marlboro brand, was the best-performing stock on the market from 1968 to 2017 when including reinvested dividends. The cigarette maker's annualized average return was 20% during that time.
The tobacco industry produced some of the 20th century's best-performing stocks.
Overview
Tobacco industry overview
Today, however, tobacco companies face a new set of challenges. Smoking rates have steadily declined worldwide, especially in the U.S., due to health concerns and increasing regulations. As a result, the industry has sought to pivot to next-generation products.
These include e-cigarettes, vaporizers, and chewable nicotine pouches, which circumvent some drawbacks of smokable cigarettes, like unwanted odor, and are perceived by some as better for your health. Some companies have looked beyond tobacco, partnering with cannabis businesses to capture the potential growth in an industry that bears many similarities to tobacco.
Tobacco stocks come with a number of risks, including increased regulation and declining smoking rates. Revenue and profit growth have been slow across the industry, but these stocks still appeal to investors because their profits and dividends have been so reliable, and profit margins are still strong. Investors are hopeful that next-generation products will eventually catalyze stronger growth, and there are some signs that's already happening.
A wave of consolidation in the industry has left just three major players in tobacco: Altria, Philip Morris International (PM -0.1%), and British American Tobacco (BTI -0.7%). With few competitors, these companies have been able to raise prices to generate more profits, even as cigarette sales volumes have fallen. Investors may also want to consider some of the smaller stocks, such as Imperial Brands (IMBB.Y -0.84%) and Japan Tobacco (JAPA.Y -1.38%) if they're looking for lesser-known tobacco companies.
Most of the discussion around tobacco stocks focuses on traditional cigarettes and next-generation products, but it's worth noting that these tobacco companies also sell smokeless products, such as chewing tobacco, in addition to cigars, pipe tobacco, and accessories like rolling papers. Keep reading to learn more about some of the top tobacco stocks.
Why invest?
Why invest in the tobacco market?
The tobacco industry offers many of the benefits it has for generations. Tobacco stocks tend to offer reliable high-yield dividends, and the product is considered to be recession-resistant since consumers buy it regardless of the state of the economy.
Though cigarette volumes are declining, especially in the U.S., tobacco companies are still finding ways to grow by raising prices, and through next-gen products like e-cigarettes, oral nicotine pouches, and heat-not-burn devices.
Overall, tobacco stocks offer reliable and growing dividends, the ability to perform even in a down economy, and exposure to growth market in smoke-free products like vapes and nicotine pouches.
Top stocks
Top tobacco stocks in 2025
| Company | Sells Smoke and Smoke-Free Nicotine Products | Notable Subsidiary Brands |
|---|---|---|
| Altria Group (NYSE:MO) | Yes | Marlboro, NJOY |
| Philip Morris International (NYSE:PM) | Yes | IQOS, Zyn |
| British American Tobacco (NYSE:BTI) | Yes | Camel, Lucky Strike |
1. Altria Group
The domestic manufacturer of Marlboro, Parliament, and Virginia Slims split from Philip Morris International in 2008. However, it still owns Philip Morris USA, the subsidiary that oversees Altria Group's cigarette brands.
Almost all of Altria's sales come from the United States, where smoking rates have steadily declined over the past generation. According to the Centers for Disease Control and Prevention, the percentage of U.S. adults who smoke tobacco fell from 21% in 2005 to 11.5% in 2021.
Unsurprisingly, Altria's cigarette shipment volumes have slipped, too. Cigarette shipment volumes fell 10.2% in 2024 to 68.6 billion, and revenue declined 1.9% to $24 billion.
The long-term decline in tobacco smoking explains why Altria has taken steps to diversify away from traditional cigarettes. After failed investments in Juul Labs and Cronos Group (CRON -0.97%), the company is now staking its next-gen strategy on Njoy, which sells both single-use vapes and pods that work with reusable devices. So far, Njoy is delivering solid growth, although it still makes up a small part of the business. In Q1 2025, Njoy's consumable shipments increased 23.9% to 1.235 billion units, and device shipments jumped 70% to 300,000 units.
Despite the difficulties it's faced in diversifying away from cigarettes, Altria Group remains a dividend powerhouse. It's raised its dividend 59 times in the past 55 years, effectively making it a Dividend King, an unofficial status due to its spin-off history.
Management has set a target payout ratio of 80% of earnings per share, knowing that its dividend is the main reason shareholders own the stock. As of April 2025, its dividend yield was an attractive 6.9%, and it paid a dividend of $1.02 per quarter.
2. Philip Morris International
Altria has looked outside the company to diversify and cushion itself from the decline of cigarette sales. However, Philip Morris is pursuing more of an in-house strategy.
The company -- which sells many of the same brands as Altria but outside the U.S. -- has pinned its hopes smoke-free products, including on heat-not-burn (HNB) tobacco products, and oral nicotine pouches. Its primary offerings in this category are the devices and cartridges sold under its IQOS (widely believed to be an acronym for "I Quit Original Smoking") brand, and Zyn nicotine pouches.
While the HNB process is similar to the one used by vaporizers and e-cigarettes, devices such as the IQOS use tobacco rather than the liquid made for vaporizers. By staying focused on tobacco, Philip Morris is taking advantage of the same supply chain for IQOS that it does for traditional cigarettes while also enjoying attractive profit margins for IQOS cartridge sales.
The company claims that HNB devices are safer than regular cigarettes because they don't burn tobacco. However, the science is still being debated, and the Food and Drug Administration (FDA) has not concluded that HNB devices are safer than cigarettes.
The strategy has been successful. More than 40% of the company's revenue now comes from smoke-free products, and IQOS is gaining market share in countries where it's available. Its 2022 acquisition of Swedish Match for $16 billion has been a success due to the popular Zyn chewable nicotine pouch. In the first quarter of 2025, sales of nicotine pouches, primarily Zyn, jumped 53% to 223.4 million.
After finding success with IQOS internationally, Philip Morris paid $2.7 billion to acquire the rights from Altria to sell the product line in the U.S. It launched the product in Austin, Texas, in March 2025.
Unlike Altria, Philip Morris posted a roughly 1.1% increase in cigarette sales volume in the first quarter of 2025. However, its sales volume of heated tobacco units (HTUs) rose 11.9% in that same quarter, indicating that devices such as the IQOS have strong growth potential.
As a dividend stock, Philip Morris does not disappoint. Since its split from Altria in 2008, the company has raised its dividend every year, and its dividend has increased by 194% as of June 2025. The stock also offers a healthy dividend yield of 3% of the share price. If its history as part of Altria were included, it would qualify as another Dividend King.
3. British American Tobacco
British American Tobacco (BAT) has also become a titan of the industry, fueled by its $49 billion acquisition of Reynolds American in 2017. Today, the company owns a range of popular cigarette brands, including Camel, Newport, Dunhill, Natural American Spirit, and Lucky Strike, as well as next-gen products, such as Vuse for vaporizing, Glo for HNB smoking, and Velo nicotine pouches.
Like other tobacco companies, BAT is focused on substantially transitioning to next-gen products. In 2024, the company saw a 8.9% decline in cigarette sales volume to 505 billion. Nicotine pouches have emerged as the fastest-growing segment from new categories, with volume sales up 55% to 8.3 million units, or 814 million pounds (about $411 million at current exchange rates).
However, the vast majority of its revenue still comes from cigarettes. The company had been targeting 5 billion pounds (almost $6 billion) in revenue from next-gen products by 2025 but said it was unlikely to get there due to a crackdown on single-use products in the U.S.
The advantage of investing in BAT over Altria and Philip Morris is that it provides exposure to the tobacco sector worldwide rather than just in the U.S. or just internationally. The company also sells a wide range of products, including cigarettes, vaporizers, chewing tobacco, and heated tobacco. Buying shares of BAT is the easiest way to gain portfolio exposure to the whole tobacco industry via just one stock.
British American also pays a generous dividend yield of 6.3%. Its high operating profit margin, which topped 45% on an adjusted basis in 2024, helps to ensure the dependability of the quarterly payout.
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Bottom line
The tobacco industry is evolving
Tobacco companies all face the same conundrum these days. Although selling traditional cigarettes is highly profitable, the business is in decline and is expected to keep declining. Tobacco companies need to find new ways to grow and diversify their businesses.
Investors may want to consider investing in a basket of tobacco stocks to gain exposure to different growth strategies and reduce risk. While income investors can still count on tobacco companies to deliver dividends, the path to growth in the industry is uncertain.
