Cigarette Sales Keep Falling. These 2 Tobacco Stocks Still Pay 5.5% Dividends

Resumen detallado

Smokers are quitting, yet two tobacco giants keep raising payouts. One has a Dividend King record, the other pays in a currency that swings every quarter. Which income stock handles the shrinking pack better?

Cigarette volumes keep shrinking, but shareholder payouts keep growing. Altria (NYSE:MO) and British American Tobacco (NYSE:BTI) both fund rising dividends with pricing power and fast-growing nicotine pouches, and at current prices each pays a forward yield of about 5.5% or better. That sits below the 6% ultra-high-yield line, but both still deliver healthy income from large, established businesses. The question for income investors is whether price increases and smoke-free products can keep paying for those dividends while the core business declines.

Altria pays $1.11 per share each quarter, an annualized $4.44. With the stock at $78.65, that works out to a forward yield of about 5.65%. Shares are up 43.02% year to date, so new buyers lock in a lower yield than shareholders who bought in January. Even so, new buyers still collect a forward yield above 5%.

Full-year adjusted diluted EPS guidance was raised to $5.66 to $5.74, representing 4.5% to 6.0% growth. The $4.44 annual dividend uses about 77% to 78% of that range. That is a high payout ratio, but it is normal for a mature business that has little need for heavy reinvestment.

Many successful investors eventually reach the same moment. The saving is done, the portfolio is built, and the question quietly changes from how much can I grow this to how much can I take out? Get that second question wrong and decades of good investing can come apart in a handful of years.

Cash flow backs it up. In the first nine months, Altria returned $5.3 billion in dividends and $735 million in share repurchases. Debt-to-EBITDA ended September at 1.9x, in line with management's target of about 2x. Cash and equivalents stood at $2.697 billion. The board also approved a $1 billion expansion of the buyback, which now runs through December 31, 2027. That suggests the board sees room beyond the dividend.

The track record is the strongest part of the case. The August raise of 4.7% was the company's 61st dividend increase in 57 years, which…

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