Nicotine's Future Looks to Be Smoke-Free -- But Ultra-High-Yield Altria Is Falling Behind

Core Insights - Altria is facing significant challenges as cigarette demand declines, which is its primary revenue source, while management emphasizes potential opportunities that may indicate the company is lagging behind [1][10] Business Overview - Altria's main business revolves around cigarette sales, which constituted 88% of its revenues in 2024, with cigarettes making up nearly 98% of smokeable tobacco volumes [2] Financial Performance - Cigarette volumes have been declining for years, with a notable drop of 10.2% in 2024; however, price increases have mitigated revenue losses, resulting in a 1.3% revenue decline and a 3.4% rise in adjusted earnings [3] - The company raised its dividend in 2024, reflecting a high dividend yield of approximately 7%, which attracts dividend investors despite the negative trends in its core business [4] Market Trends - The number of smokers in the U.S. decreased from 34 million in 2019 to 28 million in 2024, while non-combustible product users remained stable at around 8 million; however, non-combustible-only consumers surged from 11 million to 18 million, marking a 60% growth [5][6] Strategic Missteps - Altria has made several strategic errors, including spinning off Philip Morris International, which left it vulnerable in a declining cigarette market and created new competition in the non-combustible space [7] - Investments in Juul and a marijuana company resulted in significant write-offs, and while the recent acquisition of NJOY shows better sales performance, it faces patent litigation with Juul [8] Growth Opportunities - Non-combustible products are increasingly important, yet Altria has not capitalized on this trend, with non-smokeable products accounting for only 11.7% of revenues in 2024, down from 12.4% in 2019, despite the non-combustible category growing significantly [9][10]