Is Altria a Buy, Sell, or Hold in 2025?

Reuben Gregg Brewer, The Motley Fool

Mon, Apr 21, 2025, 9:15 AM 5 min read

Geopolitically driven market uncertainty has changed the way in which investors should view Altria (NYSE: MO) and its huge 7.2% dividend yield. A great many investors will likely find they still don't want to buy this cigarette maker. But there are a few that might alter their opinion in 2025, at least for a little while. Here's what you need to know to decide if Altria is a buy, sell, or hold today.

Altria's most important tobacco product is cigarettes. The nicotine in cigarettes is addictive in nature, so once a consumer starts smoking, they tend to keep smoking. This is why tobacco stocks fall into the consumer staples sector, which is generally filled with necessity items like soap and food that are bought regularly. Although tobacco is in no way a life necessity, it is bought regularly regardless of what is happening on Wall Street or in the economy.

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In fact, during difficult times, people often smoke more cigarettes. So, in times of stress, such as the one that's happening now, thanks to geopolitical issues, Altria's business can actually be fairly resilient. Now add the stock's huge 7.2% dividend yield, and you can see why an income-focused investor might want to buy Altria in 2025.

That yield is also backed by the company's very strong pricing power. For years, it has been increasing the prices of its products to support the growth of the dividend, which has been increased annually since 2009. It's a good story, but there's a wrinkle when you dig into the price increases.

The reason to hold Altria in 2025 is basically the same as the reason to buy it. It has a lofty yield that doesn't look like it is at risk in the near term. Notably, the dividend payout ratio was around 60% in 2024. That's a bit high but hardly outlandish for a consumer staples stock. And, given the nature of tobacco products, it suggests that there is no near-term reason to worry about dividend safety.

That said, if you have owned Altria for a number of years, you know that there's a long-term problem. Cigarette smoking is out of favor in North America, and thus, the company's volumes have been in a steady state of decline for years. In 2024, the company's cigarette volumes dropped a huge 10.2%. That's a terrible number, even if the company's price hikes have been able to offset the hit from dropping volumes.