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Written by Brett Schafer for The Motley Fool->
Altria's price hikes are driving earnings growth.
The company's total return has beaten some of the technology giants.
Shares of the stock look more expensive today.
Shares of Altria Group (NYSE: MO) zoomed 10% higher in April, according to data from S&P Global Market Intelligence. The tobacco giant and owner of the Marlboro brand in the United States is producing steady earnings growth through price increases while returning capital to shareholders through dividends and share repurchases.
It reported earnings in late April, yet again pleasing investors. Here's why Altria Group stock was up again in April, and whether now is a good time to buy the stock.
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Despite cigarette usage declining in the United States, tobacco companies like Altria Group are able to consistently grow earnings because of price increases on packs of cigarettes sold to retailers. Smokeable products net revenue after taxes grew 5.2% year-over-year in the first quarter of 2026, while operating earnings grew 8.3% due to better profit margins on every pack of Marlboro's sold.
Many investors may think this is unsustainable, but it is a formula of price hikes above inflation that has worked for Altria Group for decades, making it the best-performing stock of all time when dividends are included in total return calculations.
Altria's other business lines are doing well, with oral tobacco revenue up 2.9%, driven by growth in its nicotine pouch brand, on!. However, the most important aspects of Altria's stock are its dividend and share repurchase program. Management has reduced shares outstanding by around 10% over the last five years, and the dividend has increased 23% and grown every year. Expect more of the same in the years ahead.
With these recent gains, Altria Group's total return over the last five years is 131%, which actually beats some of the big technology giants like Apple and Microsoft. This is all for a tobacco stock with steadily declining unit volumes.
Today, Altria Group's price-to-earnings ratio (P/E) has risen to 15, up from under 10 a few years ago, while its dividend yield is down to 5.6% from almost 10% at the beginning of 2024. A rising stock price reduces the dividend yield, but it also hurts Altria's ability to repurchase stock and bring down shares outstanding. Both are going to hurt forward shareholder returns.
I expect Altria Group's stock to produce positive returns for shareholders over the next five years. However, given its rising valuation and fundamental decline, it is hard to make the math work for 100% gains like the last five.
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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