Altria Group Just Declared Its 61st Dividend Increase in 57 Years. Here's What $10,000 Invested Pays Annually.

A Dividend King is a stock that has raised its dividend payout for 50 consecutive years or more. Very few companies can boast this enduring accomplishment. One of them is Altria Group (NYSE: MO). The tobacco/nicotine giant has raised its dividend for 57 straight years, and 61 times in total, due to the durability of cash flows generated by its cigarette business.

It now trades at a dividend yielding 6.18%. That means, if you have $10,000 invested in Altria Group stock, you will receive a cool $618 in dividends each year.

But does that make Altria Group stock a buy?

Dividend growth math

The tobacco business has been fantastic due to its extraordinary pricing power through the decades. Packs of cigarettes -- along with other types of nicotine products -- have grown steadily above the rate of inflation, leading to growing cash flows for companies like Altria and its Marlboro brand.

This has allowed management to steadily grow its dividend per share payout to shareholders. In the last 10 years, Altria's dividend has grown by 74% cumulatively. For long-term shareholders, this can deliver growing income into your portfolio. An investor who bought at a 6.18% dividend yield 10 years ago would now be receiving $1,075 in annual dividend income.

Dividend growth like this has helped Altria Group outperform the stock indices. In the last five years, it has generated a total return of 104%, beating the S&P 500's 82%.

Image source: Getty Images.

A business struggling to grow

Where Altria Group could run into struggles is its failure to pivot away from smokeable tobacco products like Marlboro or Black and Mild. Cigarette volumes were down 3.2% year over year last quarter and are expected to decline in the future.

Other tobacco giants have worked to replace their cigarette cash flows with healthier alternatives, such as nicotine pouches or electronic vapor. Altria Group is failing to make a dent with its new offerings, such as its on! nicotine pouch brand. Volumes for on! were down 4.2% year over year last quarter, despite a growing overall nicotine pouch category in the United States, and that is with minimal overall market share already.

Unless management can spring a miracle in new nicotine categories, the future of Altria's dividend payments will be from its legacy cigarette business. Specifically, its ability to keep raising prices on cigarette packs sold.

MO PE Ratio data by YCharts

Is Altria Group still a buy?

Where Altria helps itself with dividend growth sustainability is its steady stock repurchase program. It has reduced shares outstanding by 14.4% cumulatively over the last 10 years through these buybacks, which will help grow earnings per share (EPS).

Importantly, for the dividend, a lower total number of outstanding shares will mean that Altria can raise its per-share dividend without increasing the total dollar amount paid to shareholders. This is important for a business whose overall revenue has barely budged in the last five years. You are not buying Altria Group for its growth, but its return of capital to shareholders.

The stock has done well in the last year, with the share price now at $69. It has a price-to-earnings ratio (P/E) of 14.5, which is generally higher than it has been in the last few years, but still, it has one of the fattest dividend yields of the entire market today. What investors need to decide is whether the long history of price hikes and dividend growth can continue for the next decade as well.

I don't think Altria Group stock is a screaming buy right now, but investors will probably do just fine buying today for long-term dividend income, despite the decline in its cigarette business.

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.