In today’s equity markets, a dramatic shift is underway. Wall Street appears to be turning its back on traditional high-dividend stocks like Altria Group Inc. (NYSE: MO), instead embracing trailblazers in the artificial intelligence sector such as Nvidia Corp. (NASDAQ: NVDA). Despite Altria’s tempting 7.2% dividend yield, rock-solid balance sheet, and loyal customer base, its appeal is currently overshadowed by the AI wave led by Nvidia.
This year’s market performance clearly illustrates the trend. When concerns about an AI tech bubble emerged a month or two ago, Altria’s stock was up 30% year-to-date. However, with the renewed enthusiasm for AI, the landscape shifted rapidly. Altria’s stock is now up about 13% for the year, slightly underperforming the S&P 500’s 14% gain. In stark contrast, Nvidia has seen a staggering 40% surge this year. Over a longer horizon, Nvidia’s stock has skyrocketed nearly 1,400% in the past five years, dramatically outpacing the overall market’s 86% rise.
Altria’s business focuses on cigarettes and smokeless tobacco. While not poised for explosive growth, the stable demand for its products makes it a classic defensive stock. The prevailing market view suggests that Altria’s investment value will only be widely recognized again when the AI bubble bursts.
Among high-dividend payers, Altria is considered one of the safest options, underscored by its 7.2% yield and a remarkable history of raising its dividend 60 times over the past 56 years. Often mentioned alongside other long-term high-yield stocks like Dow Inc. (NYSE: DOW) and Pfizer Inc. (NYSE: PFE), Altria’s consistency stands out. Pfizer is down 6% this year, while Dow has plummeted 47% and recently cut its dividend.
Altria is exceptionally generous in shareholder returns. From fiscal 2020 to 2024, the company distributed a total of $32 billion in dividends and repurchased $8 billion of its own shares.
In the most recent quarter, Altria’s revenue dipped 3% to $6.1 billion. However, its adjusted diluted earnings per share (EPS) grew 5% to $1.41, and the company slightly raised its full-year EPS guidance. CEO Billy Gifford commented, “Altria continued to build significant momentum in the third quarter with exciting progress across our businesses.” Although the company’s heavy reliance on cigarette sales deters some investors, its substantial dividend serves as a significant counterbalance to these concerns.
Another reason to consider Altria is the potential risk to the global economy. Consumers typically do not significantly reduce cigarette consumption during tough economic times. Coupled with its excellent balance sheet, the company’s dividend-paying capability is expected to remain stable.
Finally, the lingering threat of tariffs adds to its defensive appeal. Increased tariffs and their inflationary effects could erode American consumers’ purchasing power and threaten U.S. GDP growth. Should such a scenario materialize, Altria might emerge as a top stock to own – provided investors can look past its core tobacco business.
Conclusion: While current market enthusiasm is overwhelmingly focused on the growth narrative embodied by Nvidia, Altria, with its undeniable high yield and safety cushion, remains a defensive option worth watching for investors anticipating a potential reversal in the AI frenzy.
