Is Altria Group Stock a Buy, Sell, or Hold in 2025?

Core Viewpoint - Altria Group has revised its 2028 goals for smoke-free products due to competitive pressures from illegal vape products, raising concerns about its future growth prospects and reliance on traditional smokeable products [1][5][11]. Group 1: Financial Performance - Altria's share price increased nearly 30% in 2024, with a total return of 41% including dividends, indicating strong performance in the dividend investing community [1]. - For the full year 2024, Altria generated $10.8 billion of its$11.8 billion in operating profits (91%) from smokeable products, highlighting its dependence on this segment [3]. - Analysts project Altria's earnings to grow at an average rate of 3.5% annually over the next three to five years, with typical dividend raises averaging 4% in recent years [9]. Group 2: Business Strategy and Challenges - Altria has been focusing on diversifying its product offerings into next-generation nicotine products, such as oral nicotine pouches and electronic devices, which are viewed as the future of the industry [4]. - The company has faced challenges due to the prevalence of illegal vape products, which management estimates account for over 60% of the vaping market, impacting its smoke-free product goals [5][6]. - Despite these challenges, Altria maintains a comfortable dividend payout ratio of 80% of earnings and a strong balance sheet, with a leverage ratio of 2.1 times EBITDA [7]. Group 3: Market Position and Valuation - Altria's stock currently yields 7.7%, which is considered high but reflects the company's strategy of allocating most cash flow to dividends amid limited growth prospects [8]. - The stock's price-to-earnings ratio is approximately 10, which is lower than the broader market, but the price/earnings-to-growth (PEG) ratio stands at 2.8, indicating potential long-term risks [10][11]. - The company’s cigarette business has unique pricing power, but there is uncertainty regarding whether future revenue streams from diversified products will match current profit margins [11].