Altria Group Now Yields Twice as Much as Coca-Cola. Is It the Most Overlooked Dividend Stock? Here's the Clear Answer.

Coca-Cola (NYSE: KO) is the stock most income investors picture when they think "safe dividend." Right now it yields about 2.3%. Altria Group (NYSE: MO), the owner of Marlboro and a Dividend King in its own right, yields close to 6%, more than double. A gap that wide usually means one of two things: the market is sleeping on a good business, or it's pricing in a real problem. With Altria, I think it's mostly the second one, with a smaller piece of the first.

Why the market prices Altria so much cheaper

Coca-Cola sells a product more people drink every year around the world. Altria sells cigarettes, a product fewer Americans smoke every year, by design and by regulation. That's the entire gap in a sentence. U.S. adult smoking rates have been falling for decades, and Altria's own cigarette shipment volumes decline most years accordingly. A lower growth rate, or an outright shrinking core business, gets priced with a lower earnings multiple and, mechanically, a higher dividend yield at the same payout amount. That's not the market being lazy. That's the market doing its job.

What Altria is actually doing about it

Where this gets more interesting is in what Altria is doing with the cash that declining cigarette volumes still generate in enormous quantities. The company just raised its quarterly dividend 4.7% to $1.11 a share in August, its 61st increase in the past 57 years, and it's targeting mid-single-digit annual dividend growth through 2028. That takes real cash discipline, and Altria is funding it two ways: squeezing more profit out of a shrinking cigarette business through pricing power, and building a real position in nicotine pouches, the one part of the tobacco category still growing fast.

Image source: Getty Images.

Altria's on! brand, especially the newer on! PLUS line, is the vehicle for that second bet. Nicotine pouches now make up roughly 60% of the broader oral tobacco category, up sharply from a year ago, and Altria expanded on! PLUS to about 120,000 stores this year, with a stronger 12-milligram version rolling out nationally and new flavors coming before year-end. The honest complication: on!'s share of that growing category actually slipped to around 14%, as Philip Morris International's (NYSE: PM) ZYN keeps winning the bigger piece of a bigger pie. Altria is growing inside a growth category and still losing ground to a tougher competitor, which tells me the dividend's safety depends more on cigarette pricing power holding up than on pouches riding to the rescue anytime soon.

Is it actually overlooked, or fairly priced?

I don't think Altria being "overlooked" is quite right. Altria isn't a hidden gem nobody has noticed, it's a well-known, heavily analyzed stock that the market has deliberately priced for slow, cash-heavy decline rather than growth. That's a very different thing from being mispriced. What I'd call genuinely underappreciated is how well-covered the dividend still is: Altria's 2026 guidance calls for adjusted earnings per share of $5.61 to $5.72, against a $4.44 annualized dividend, a payout ratio in the high 70s to around 80%, uncomfortably high for most industries, but one Altria has sustained for years because its cash flow doesn't depend on reinvesting heavily in growth.

If you're buying Altria, you're not betting that the business will turn into a growth story. You're betting that a slowly shrinking cigarette business, with real pricing power and a real cash machine behind it, can keep funding a growing dividend for years to come, even if the stock itself goes nowhere in between. That's a legitimate income strategy for the right investor.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.