Is Altria (MO) a Good Stock to Buy?

Evaluating a stock for potential investment involves examining a company’s business, financial health, and market position. This analysis helps understand its operational framework and performance. This article will delve into Altria Group (MO) to inform investment considerations.

Company Overview and Business Segments

Altria Group, Inc. operates as a holding company, primarily manufacturing and marketing tobacco products in the United States. Headquartered in Richmond, Virginia, Altria manages operations through wholly-owned subsidiaries like Philip Morris USA (PM USA), U.S. Smokeless Tobacco Company (USSTC), John Middleton, and Helix Innovations. These subsidiaries serve adult consumers across various product categories.

The company’s business is segmented into three primary areas: smokeable products, oral tobacco products, and wine. The smokeable products segment, which includes cigarettes like Marlboro, Parliament, and Virginia Slims manufactured by PM USA, represents the largest contributor to Altria’s revenue. This segment also encompasses machine-made large cigars and pipe tobacco through the John Middleton subsidiary, with Black & Mild being a notable brand.

The oral tobacco products segment features moist smokeless tobacco brands like Copenhagen and Skoal from USSTC, and oral nicotine pouches marketed under the on! brand by Helix Innovations. Altria fully owns the on! nicotine pouch business. Beyond tobacco, Altria also has a presence in the wine industry through Ste. Michelle Wine Estates, producing premium wines like Chateau Ste. Michelle and Columbia Crest. The company also holds a financial interest in Anheuser-Busch InBev and has investments in the cannabis sector.

Financial Performance and Key Metrics

Altria’s financial performance reflects dynamics within its operating segments and broader market conditions. For the second quarter of 2025, net revenues experienced a 1.7% decrease year-over-year, totaling $6.1 billion. Reported net earnings for the same period declined by 37.5% to $2.37 billion, with reported diluted earnings per share (EPS) dropping to $1.41. However, adjusted diluted EPS showed an increase of 8.3%, reaching $1.44.

Looking at the full fiscal year 2024, Altria reported net revenues of $24.0 billion, a 1.9% decrease from the previous year. Net earnings for 2024 significantly increased by 38.5% to $11.3 billion, leading to a reported diluted EPS of $6.54, up 43.1%. The smokeable products segment’s revenue decreased, while oral tobacco products saw revenue growth in the second quarter of 2025, driven by higher pricing and increased sales of on! nicotine pouches.

Adjusted operating companies income (OCI) margins increased by 2.9 percentage points to 64.5% in the second quarter of 2025. For the full year 2024, the total adjusted OCI margin was 60.3%. Altria’s balance sheet indicates notable leverage, with the debt-to-equity ratio for the trailing twelve months ending June 30, 2025, reported at -9.98 due to negative shareholder equity.

The company aims to maintain a debt-to-Consolidated EBITDA ratio of approximately 2.0x. Altria generated $2.9 billion in free cash flow during the first half of 2025. Altria’s trailing twelve-month price-to-earnings (P/E) ratio was 12.96 as of August 25, 2025, with an estimated P/E ratio for 2025 of approximately 10.79. The return on equity (ROE) for Altria was reported as negative 295.26%.

Dividend Profile and History

Altria Group has a history of consistent dividend payments and increases. The company currently pays an annual dividend of $4.08 per share, recently increasing to $1.06 per share quarterly. This translates to a dividend yield of approximately 6.4%. Dividends are paid quarterly, with recent ex-dividend dates set for September 15, 2025, and payments scheduled for October 10, 2025.

Altria has increased its dividends for 56 consecutive years, earning it the designation of a Dividend King. The dividend payout ratio is approximately 78.92%. Altria targets an 80% payout ratio of adjusted diluted earnings per share, aligning its dividend policy with its earnings capacity.

Altria’s dividend is supported by its free cash flow generation. The company reported $2.9 billion in free cash flow during the first half of 2025. Management aims for mid-single-digit dividend per share growth annually through 2028.

Industry Landscape and Strategic Initiatives

The tobacco industry faces evolving consumer preferences and regulatory oversight. A significant trend is the ongoing decline in cigarette volumes, influenced by increased health awareness and shifts towards alternative nicotine delivery systems. For example, domestic cigarette shipment volume for Altria’s smokeable products segment decreased by 10.2% in 2024.

Altria has responded to these industry shifts by diversifying its product portfolio beyond traditional combustible tobacco. The company’s “Moving Beyond Smoking” strategy focuses on transitioning adult smokers to smoke-free alternatives. This includes substantial investments in non-combustible categories.

A key focus is oral nicotine pouches, particularly the on! brand, which has shown strong performance. Altria also holds interests in e-vapor products, specifically NJOY, whose products received market authorizations from the U.S. Food and Drug Administration (FDA). Altria also has a joint venture with JT Group for U.S. marketing of heated tobacco stick products.

The regulatory environment continues to shape the industry, with FDA regulations influencing product development. Beyond product diversification, Altria has implemented operational efficiency programs, such as the “Optimize & Accelerate” initiative, generating significant cost savings. The company also engages in share repurchase programs.