While you speak about essentially the most dependable dividend shares, Altria’s (MO) title normally comes up. With a lovely dividend yield of round 6%, which is considerably increased than the patron staples common of 1.8%, the tobacco big stays a magnet for income-oriented portfolios. The corporate has additionally elevated its payout greater than 50 occasions in a row, making it a member of the elite group of “Dividend Kings.”
Altria inventory has gained 29% year-to-date, outperforming the general market acquire of 8.5%.
Nonetheless, lately, considerations have been raised in regards to the firm’s means to maintain its beneficiant dividend program within the face of regulatory challenges, declining cigarette volumes, and shifting client preferences. Let’s discover out.
Regardless of all headwinds, Altria’s dedication to rewarding traders has lengthy been admired.
Within the first half of 2025 alone, the corporate returned greater than $4 billion in dividends and share repurchases. This shareholder-first method is firmly rooted in Altria’s DNA. Cigarettes, Altria’s core enterprise, are on the decline however stay staggeringly worthwhile.
Notably, home cigarette volumes fell by 10.2% within the second quarter and 11.9% within the first half of 2025. Altria is growing earnings regardless of experiencing quantity declines in its core enterprise. That’s as a result of worth realization continues to be sturdy. Internet worth realization was 10% within the second quarter, and 10.4% within the first half of 2025. In different phrases, Altria is efficiently lowering quantity pressures by elevating costs. In the course of the Q2 earnings name, administration acknowledged that Marlboro maintained its dominance, growing its premium share to 59.5%. At the same time as fewer folks smoke, the corporate makes extra money from the purchasers it retains.
Tobacco stays one of the resilient client merchandise attributable to nicotine’s addictive nature. Cigarettes, not like discretionary merchandise, are in excessive demand even throughout recessions, guaranteeing that Altria’s money flows stay comparatively steady. Adjusted diluted earnings per share (EPS) elevated by 8.3% to $1.44 within the second quarter, and by 7.2% within the first half. This profitability, mixed with disciplined price administration, permits Altria to take care of free money flows adequate to help its payout.
When an organization pays out practically all of its earnings in dividends, its sustainability is named into query. A dividend payout ratio is a measure of how a lot of its earnings the corporate distributes as dividends. If an organization’s payout ratio is excessive, it doesn’t have a lot left over to reinvest within the enterprise, elevating considerations about dividend sustainability. Altria’s ahead payout ratio of 72.9% is comparatively excessive. Whereas it’s manageable in the meanwhile, traders are involved that if money flows deteriorate, this dividend will turn into more and more weak. Moreover, it limits the power to reinvest within the enterprise or scale back debt.
