Should You Buy This Ultra-High Dividend Yield Stock in Preparation For a Market Crash?

Key Points

• Altria Group fuels its dividend through its cigarette business.

• The company is investing in new areas of the nicotine market.

• Altria Group's countercyclicality makes it a great balance to a growth investor's portfolio.

• 10 stocks we like better than Altria Group ›

Investors are bulled up on hypergrowth technology stocks right now, especially anything related to artificial intelligence (AI). I would guess that many readers have large exposure to these AI stocks that have been massive winners in the last few years.

There is nothing inherently wrong with allocating your portfolio to hypergrowth stocks. However, if you are an older or more conservative investor, now may be the perfect time to optimize your portfolio for performing through all market cycles. Hypergrowth AI stocks soar during bull markets, but when the inevitable bear market hits (like in 2022), they can crash. If you are not comfortable with 50% or higher drawdowns, more conservative dividend-paying stocks may be for you.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

One ultra-high dividend-yielding stock that has done well so far in 2025 is Altria Group (NYSE: MO). The tobacco and nicotine giant has a dividend yielding over 6%. Does that make it the perfect stock to buy in preparation for a market crash?

Steady tobacco cash flows

Altria owns brands like Marlboro cigarettes, oral tobacco products, cigars, and electronic nicotine vapes. It also has a large investment in Anheuser Busch.

Usage of cigarettes in the United States -- Altria's core market -- has been in decline for years. The company has optimized its profits despite these declines through price increases, cost cuts, and financialization of its cigarette business. This has driven consolidated free cash flow at the company to grow by 59% in the last 10 years, hitting $8.7 billion over the last 12 months.

In order to build its business for the future, Altria is slowly investing to move beyond cigarettes. Its cigars business is steady, while electronic vaping and nicotine pouches continue to grow. Its On! nicotine pouch brand reported 26.5% volume growth last quarter. To further expand into new nicotine categories, Altria just partnered with KT&G Corporation out of South Korea for exposure to new nicotine pouch brands and investments into the energy space. It is too early to tell what the effect of this partnership will be, but it shows where Altria is focused for the future of its operations.

Image source: Getty Images.

Steady dividend growth

Cigarettes keep providing Altria with steady cash flow, bolstered by price increases. The stock now has a dividend yield of 6.27%, with its dividend per share payout growing steadily in the past 10 years, up 87.6% over that timespan.

The company is generating free cash flow per share of $5.15, versus the current annual dividend per share of $4.24. This gap between free cash flow and dividend obligations should allow the company to keep growing its dividend payout to shareholders, even at a starting yield of over 6%. Along with share repurchases that reduced shares outstanding and therefore make it easier to raise the dividend per share, Altria has a clear path to keep growing its dividend per share over the next decade, just as it has in the last one.

MO Dividend data by YCharts.

Is Altria Group a buy to prepare for a market crash?

Unlike other trendy businesses such as AI infrastructure investments that may experience huge levels of volatility in a market crash or recession, tobacco businesses such as Altria remain steady through all market environments. In fact, volumes for tobacco and nicotine usage actually improve when the economy is in rough shape.

That makes the stock a perfect buy to balance out a portfolio of hypergrowth AI names. If you own steady dividend stocks like Altria, not only do you get 6%+ back on your investment every year in cash, you might have a stock that does well when the market inevitably crashes. That could give you a counterbalance in your portfolio to take advantage of any dips.

If you are worried about having too much exposure to AI growth stocks, Altria Group may be the perfect ultra-high dividend-yielding stock for you.

Should you invest $1,000 in Altria Group right now?

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Brett Schafer 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.