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 generous dividends.
According to Wharton professor Jeremy Siegel, Altria Group (MO -7.80%), 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.
Tobacco industry overview
Let's take a look at a few things every investor should know about investing in tobacco stocks.
- Historically, tobacco stocks have been strong performers, delivering both steady growth and high dividend yields.
- Cigarette smoking is declining globally, especially in the U.S., putting pressure on tobacco stocks.
- As a result, tobacco companies are pivoting to next-gen products like vaporizers, heat-not-burn devices, oral nicotine pouches, and others.
- Regulation is a major issue for tobacco companies, and navigating government rules is key to success. For example, regulators essentially killed Juul, the maker of flavored vapes, following a $12.8 billion investment from Altria.
- Margins in the industry have historically been high.
- Tobacco companies typically return most profits to investors through dividends.
- There are three major companies: Altria, Philip Morris International (PM -0.69%), and British American Tobacco (BTI -0.85%).
- Tobacco falls into the consumer staples sector, so sales of the product aren't typically affected by the economic cycle.
Why invest in the tobacco market?
The tobacco industry has been a winner for investors for generations. Tobacco stocks tend to offer reliable high-yield dividends, and the product is considered 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 markets in smoke-free products like vapes and nicotine pouches.
Top tobacco stocks in 2025
| Name and ticker | Market cap | Dividend yield | Industry |
|---|---|---|---|
| Altria Group (NYSE:MO) | $104.1 billion | 6.65% | Tobacco |
| Philip Morris International (NYSE:PM) | $228.5 billion | 3.76% | Tobacco |
| British American Tobacco (NYSE:BTI) | $112.7 billion | 5.95% | Tobacco |
1. Altria Group
NYSE: MO
Key Data Points
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 smoked 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 -0.81%), 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 60 times in the past 56 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 October 2025, its dividend yield was an attractive 6.56%, and it paid a dividend of $1.06 per quarter.
2. Philip Morris International
NYSE: PM
Key Data Points
While Altria has looked outside the company to diversify and cushion itself from the decline of cigarette sales, 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 second quarter of 2025, sales of nicotine pouches, primarily Zyn, jumped 43% to 214.7 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. As of October, the product is only available in Austin and Fort Lauderdale.
Philip Morris posted a roughly 1.3% drop in cigarette sales volume during the first nine months of 2025. However, its sales volume of heated tobacco units (HTUs) rose 12.2% in those same three quarters, 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 over 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
NYSE: BTI
Key Data Points
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 British 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 6.1%. Its high operating profit margin, which topped 45% on an adjusted basis in 2024, helps to ensure the dependability of the quarterly payout.
How to invest in tobacco stocks
Buying tobacco stocks is as easy as buying any other kind of publicly traded company. Just follow the steps below.
- Open your brokerage app: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
Related investing topics
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.
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