Could Ultra-High-Yield Altria Help You Retire a Millionaire?

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.

Altria is an industry leader

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.

Image source: Getty Images.

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.

Altria is facing down a major headwind

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.

The other big issue here is that Altria knows there's a problem and so far hasn't had much success doing anything about it.

It has tried. For example, it bought a stake in vape maker Juul and a marijuana company, but neither worked out, and the company had to take massive write-offs.

The recent acquisition of vape maker Njoy appears to be working out better, but the business is too small to have much impact on the company's results (it is still classified in an "other" catchall revenue category). Is it worth betting your retirement on the success of a tiny little business that isn't even big enough to break out on its own yet?

Altria is a high-risk, high-yield stock

Altria has a storied history, but the future is not going to look like the past given the changes taking shape in the cigarette market. The company is trying to adjust as best it can, but Wall Street is worried that it won't succeed, which is why the dividend yield is so high.

Given the failures so far and the small size of the one successful new business that the company hopes will solve its cigarette problems, most dividend investors should tread with extreme caution here. Could Altria help you retire a millionaire? Sure, but it could also leave you broke. The risk/reward balance is probably tilted too far to the risk side right now for all but the most aggressive investors.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.