Brett Schafer, The Motley Fool

Sat, Jun 21, 2025, 6:47 AM5 min read

• Shares of Altria Group have been soaring because of market uncertainty.

• The company is trying to diversify away from cigarettes with little success so far.

• It has a highly levered balance sheet, which will impact its ability to pay a dividend.

• 10 stocks we like better than Altria Group ›

The resurgence of tobacco stocks has been an underdiscussed theme in 2025. While the world is worried about foreign conflicts, tariffs, and the Federal Reserve, stocks like Altria Group (NYSE: MO) have sneakily crushed the market. Shares are up close to 17% this year and are approaching $60, a level Altria hasn't hit since 2017. In times of uncertainty, investors flock to safe-haven stocks, such as tobacco, which typically perform consistently through all economic environments.

Altria Group still has a dividend yielding 6.85% right now, making it one of the highest dividend payers investors can buy today. But does that mean you should buy the stock? The answer may not be so simple. Here's why.

Altria is the owner of the Marlboro cigarette brand in the United States, focused solely on selling in the United States domestic market. As many readers are aware, cigarette usage in the United States has declined dramatically in recent decades, which has put stress on Altria's operations. These declines are only expected to continue, as young adult usage has quickly dropped in recent years, which will put further pressure on product volumes.

To diversify away from cigarettes, Altria has made major investments and acquisitions into other vice products. These include areas like cannabis, nicotine pouches, cigars, electronic vaping, and alcohol. So far, it has seen muted success in these new sectors and some major failures. Most notable was the company's huge $12.8 billion investment in Juul, which was eventually written down to zero. It currently has a sizable stake in Anheuser Busch, but that has been a long-term holding for the company.

Overall, if we look at Altria's business, it is still mainly driven by the smokeables segment, the majority of which is driven by cigarette consumption. Last quarter, 88% of Altria's net revenue came from smokables. Its new vaping and nicotine pouch initiatives are still a tiny part of the overall company.

Cigarette usage in the United States is declining rapidly and looks to be accelerating as consumers shift their nicotine consumption to tobacco-free categories like nicotine pouches. Last quarter, Marlboro volumes declined 13.3% year over year. Historically, cigarette usage declined at under 5% a year, making recent years a huge shift in the industry. This presents a large risk for Altria Group and its cash cows.