While ethical investors may choose to stay away from blue-chip tobacco stocks Altria Group (MO) currently has the highest dividend in the S&P 500 with a red-hot yield.
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Altria, best known for its iconic Marlboro cigarettes, was created in 2007 as a spin-off from Philip Morris (PM). Altria took control of U.S. tobacco interests and emphasized dividend growth and stock buybacks, while Philip Morris focused on the international market.
Altria Offers a Smoking 8.9% Yield
With a yield of 8.9%, Altira is currently the highest-yielding stock in the S&P 500. The company has a long history of dividend growth, including its parent company having 54 consecutive years of dividend increases.
While many high-yield stocks pose significant risks for investors, Altira is on solid financial footing. The dividend stock has an investment grade rating (A-) from S&P Global. Additionally, the company offers significant value to investors and trades at a price-to-earnings ratio of just 9.
This modest rating is due to a long-term, long-term decline in tobacco sales that shows no signs of abating. In Altria’s first-quarter results April 25, revenue fell 2.5% year-over-year to $5.58 million.
Still, Altria Group maintained its dominance despite industry-wide weakness, with Marlboro brands’ retail share at 42% of the domestic market, unchanged from a year ago. This consumer loyalty is reassuring considering that inflation could cause consumers to switch to some of Marlboro’s cheaper competitors.
Dividend Stock’s e-cigarette business is growing
Altria is also continuing its expansion into e-cigarette products to appeal to younger consumers. After acquiring cigarette and e-cigarette company NJOY last June for $2.75 billion, the company has rapidly expanded production. 11.9 million units were shipped in the first quarter.
While uncertainty remains about the regulatory landscape surrounding e-cigarettes, shares of Altria have remained stable. They have remained in their 40s and 50s for much of the last five years.
The dividend stock is trading above both the 50-day and 200-day moving averages. According to MarketSurge pattern recognition, the stock is forming a flat base with a buy point of 45.
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