There are a lot of things to like about Altria (NYSE: MO), particularly if you are a dividend investor. But there are also a few very important things to be worried about.
No company is perfect, so you always have to take some bad with the good. But if you are hoping to retire a millionaire on Altria’s dividend, you’ll want to think extra hard about the bad here.
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To give credit where credit is due, Altria owns the most important brand in its category in North America. And it isn’t even close when you look at the market share numbers. Altria’s market share in cigarettes was a huge 45.7% in the third quarter of 2024. The Marlboro brand alone accounted for 41.7 percentage points of that total. Put simply, Altria’s Marlboro brand is a category dominator.
The strength of the Marlboro brand has allowed Altria to increase its dividend annually for decades. And given the dividend yield of 7.3% today, it makes sense for income-focused investors to take a close look.
Think about that yield for a second. All Altria needs to do is increase the dividend 2.7 percentage points and you would likely be getting the 10% total return investors generally expect from the broader market over time.
For investors who are already retired, buying Altria certainly looks like a chance to set up a lifetime of lofty dividend payments. For those not ready to turn on that income stream, dividend reinvesting would allow the payout to compound over time. It isn’t unreasonable to think that Altria could help you retire a millionaire. There’s just one problem: the product.
Cigarettes are increasingly falling out of favor in the North American market that Altria serves. Having the most important high-end cigarette brand in a cigarette market that is, effectively, drying up isn’t necessarily a great long-term proposition for shareholders. The numbers are getting worse, too, not better.
In 2022, Altria’s cigarette volume fell 9.7%. In 2023, the decline was 9.9%. And through the first nine months of 2024, the drop was 10.6%. Sure, that trend could turn around, but are you willing to bet your retirement on it?
So far, Altria has been able to offset those declines with price increases. That’s great, for now. But at some point, price increases are likely to make the volume declines worse.
At that point, the price increases may have to slow down or possibly even stop. Or the company may have to consider other options for conserving cash, such as cutting its dividend.
