Is Altria's 7.3% Yield Safe? This 1 Thing Matters Most in 2026

Tobacco giant Altria Group (NYSE: MO) has done quite well in 2025. The stock is up by roughly 10% since January, or 16% if you include dividends. That hasn't been the norm in recent years: After various up and down periods, Altria is close to flat over the past decade, dramatically underperforming the broader market.

Slow growth in sales is primarily to blame. The Marlboro maker's customer base is steadily shrinking as fewer people smoke cigarettes over the years. Because of this, those who choose to own the tobacco stock likely picked it for its dividend. Altria is not only a Dividend King -- a company with at least 50 consecutive annual dividend increases -- but also yields a whopping 7.3% at its recent share price.

The sustainability of that dividend is likely on the minds of shareholders as we head into 2026.

Here is whether you can continue to count on Altria to deliver that dividend, as well as what the company's most pressing matter is next year.

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Is Altria's dividend safe?

High dividend yields can often signal trouble. Companies set their payout amounts, but the yield is also a function of the share price. In other words, the stock market has a say in determining the yield. When it's very high, there's often an inauspicious reason.

In Altria's case, the company's core cigarette business is fading, so there's not much top-line growth. The stock price is discounted accordingly, but those lower share prices do compensate investors by providing a higher yield. In other words, investors buy the stock for the reliable dividend income, not with the expectation of strong share price appreciation.

Financially speaking, Altria is rock solid. The company regularly raises cigarette prices to offset its steadily shrinking sales volumes, a strategy that has allowed it to keep making small annual increases to its dividend. This playbook has been effective for decades, and analysts expect Altria to grow its earnings by 3% annually over the next three to five years.

The dividend payout ratio is 82% of 2025 earnings estimates, and Altria still holds a multibillion-dollar stake in Anheuser-Busch InBev that it could liquidate for cash if it needed to. No, Altria stock won't deliver much in the way of returns beyond its dividend, but you can continue to count on it.

The one key thing investors must watch next year

The further you gaze into the future, the riskier an investment Altria becomes. The tobacco industry is evolving gradually away from cigarettes and toward smoke-free nicotine products like electronic vapes, heat-not-burn tobacco devices, and oral nicotine salt pouches.

The industry's other major players have made meaningful progress in incorporating these newer products into their businesses. In their most recent earnings reports, next-generation products comprised 41% of Philip Morris International's net sales and 18.2% of British American Tobacco's.

Altria, by contrast, still relies heavily on cigarettes and cigars, which accounted for more than 88% of its net revenue in the third quarter. The company is working to grow its smoke-free offerings, but it risks losing market share over time if it doesn't start making up some ground.

So shareholders should go ahead and enjoy those dividends in 2026. However, long-term investors will want to closely monitor the progress of Altria's ongoing transition in focus away from its core cigarette business.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool recommends British American Tobacco P.l.c. and Philip Morris International and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.