Best Stock to Buy Right Now: Altria vs. Philip Morris International

Tobacco stock investors don't have a lot of choices these days, so if you're looking to invest in one of these classic dividend payers, two of the first stocks that are likely to come up on your radar are Altria (NYSE: MO) and Philip Morris International (NYSE: PM).

The two stocks have their differences, though they were once the same company before they split in 2007. While both companies own the same set of cigarette brands, led by Marlboro, Altria retained the domestic business, while Philip Morris operates outside the U.S.

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Let's take a look at how these two dividend stocks stack up against each other today.

Image source: Getty Images.

Business model: Altria vs. Philip Morris International

You might assume that as cigarette makers, Altria and Philip Morris have the same business models, but that isn't entirely true.

Both companies have been focused on diversifying away from cigarettes to next-generation, smoke-free products, but Philip Morris has had significantly more success than Altria. Philip Morris has developed Iqos, its heat-not-burn devices that use tobacco sticks, which have gained significant market share in major markets around the world like Japan, and the company even acquired the rights to sell Iqos in the U.S. from Altria.

Philip Morris has also found success with Zyn, the oral nicotine pouch brand it gained in its acquisition of Swedish Match. The company is even expanding production of Zyn in order to meet growing demand.

In 2024, its smoke-free business delivered 14.2% revenue growth, and smoke-free products now make up 40% of revenue, showing the company is moving beyond cigarettes.

Meanwhile, Altria has faced significant setbacks, as its $12 billion investment in Juul was reduced to essentially nothing due to a regulatory crackdown, and its pivot to the cannabis industry with a minority investment in Cronos Group also fell flat.

Altria has now put its faith in Njoy after acquiring the maker of e-cigarettes and vaping products for $2.7 billion in 2023, which has full marketing authorization from the FDA, ensuring Altria won't make the same mistake it did with Juul.

Njoy is delivering solid growth for Altria, with consumable shipment volume up 15.3% to 12.8 million, but smokable products still make up close to 90% of Altria's revenue.

Financials: Altria vs. Philip Morris

Looking at the financial results head to head, Philip Morris benefits from operating in international markets, where smoking hasn't faced the same degree of regulatory and cultural pushback that it has in the U.S.

In 2024, Altria reported a decline in revenue of 1.9% to $24 billion, primarily due a 10.2% slide in cigarette shipment volume, which was partially offset by higher prices.

Altria remains highly profitable, with an adjusted operating margin of 61.2%, and adjusted earnings per share rose 3.4% in 2024 to $5.12.

On the other hand, Philip Morris managed to grow international cigarette volume in 2024, rising 0.6% to 616.8 billion, showing a much different market than in the U.S. Overall revenue rose 7.7% to $37.9 billion, and operating income jumped 16% to $14.9 billion. Adjusted earnings per share, meanwhile, were up 15.6% to $6.95.

Dividend and valuation: Altria vs. Philip Morris International

Altria has long had a reputation as a top dividend payer, and that remains true, as it currently offers a dividend yield of 7%. It also has a long history of raising its dividend every year.

Looking at valuation, based on its trailing adjusted earnings per share, Altria trades at a price-to-earnings ratio of 11.3.

Philip Morris, on the other hand, has a dividend yield and valuation that reflects its faster growth, as its dividend yield is currently 3.5%, and it has a P/E ratio of 22 based on its adjusted EPS of 6.95.

With a higher dividend yield and a lower valuation, Altria has the edge here.

Which is the better buy?

While Altria does seem to have finally found a growth vehicle it can count on in Njoy, the company is still losing revenue, and its core cigarette business faces much stiffer headwinds than Philip Morris's does.

Philip Morris, meanwhile, has found success with next-gen products like Zyn and Iqos, and is growing much faster than its tobacco stock peers, as even its cigarette business is still delivering growth.

Philip Morris trades at a premium, but for good reason. With its strength in next-gen products, it has a clear path for long-term growth. That means it's worth paying up for.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cronos Group. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.