When you talk about the most reliable dividend stocks, Altria’s (MO) name usually comes up. With an attractive dividend yield of around 6%, which is significantly higher than the consumer staples average of 1.8%, the tobacco giant remains a magnet for income-oriented portfolios. The company has also increased its payout more than 50 times in a row, making it a member of the elite group of “Dividend Kings.”
Altria stock has gained 29% year-to-date, outperforming the overall market gain of 8.5%.
However, recently, concerns have been raised about the company’s ability to sustain its generous dividend program in the face of regulatory challenges, declining cigarette volumes, and shifting consumer preferences. Let’s find out.
Despite all headwinds, Altria’s dedication to rewarding investors has long been admired.
In the first half of 2025 alone, the company returned more than $4 billion in dividends and share repurchases. This shareholder-first approach is firmly rooted in Altria’s DNA. Cigarettes, Altria’s core business, are on the decline but remain staggeringly profitable.
Notably, domestic cigarette volumes fell by 10.2% in the second quarter and 11.9% in the first half of 2025. Altria is increasing earnings despite experiencing volume declines in its core business. That is because price realization is still strong. Net price realization was 10% in the second quarter, and 10.4% in the first half of 2025. In other words, Altria is successfully reducing volume pressures by raising prices. During the Q2 earnings call, management stated that Marlboro maintained its dominance, increasing its premium share to 59.5%. Even as fewer people smoke, the company makes more money from the customers it retains.
Tobacco remains one of the most resilient consumer products due to nicotine’s addictive nature. Cigarettes, unlike discretionary products, are in high demand even during recessions, ensuring that Altria’s cash flows remain relatively stable. Adjusted diluted earnings per share (EPS) increased by 8.3% to $1.44 in the second quarter, and by 7.2% in the first half. This profitability, combined with disciplined cost management, enables Altria to maintain free cash flows sufficient to support its payout.
When a company pays out nearly all of its earnings in dividends, its sustainability is called into question. A dividend payout ratio is a measure of how much of its earnings the company distributes as dividends. If a company’s payout ratio is high, it does not have much left over to reinvest in the business, raising concerns about dividend sustainability. Altria’s forward payout ratio of 72.9% is relatively high. While it is manageable for the time being, investors are concerned that if cash flows deteriorate, this dividend will become increasingly vulnerable. Furthermore, it limits the ability to reinvest in the business or reduce debt.
