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

Altria Group (NYSE: MO) makes and sells Marlboro cigarettes. Philip Morris International (NYSE: PM) makes and sells Marlboro cigarettes. How do they both do the same thing? They limit their sales to different markets. Philip Morris was spun off by Altria so the latter could focus entirely on the North American market.

If you are looking at these two stocks with the idea of holding one for the long term, you'll probably want to think carefully about the mistakes that Altria has made. That list looks increasingly like it includes spinning off Philip Morris.

Here's what you need to know before you buy either of these tobacco stocks.

Consumer staples, but not necessities

Tobacco companies are classified as consumer staples stocks. In some ways, that makes a great deal of sense. Nicotine has addictive properties, so consumers tend to buy tobacco products through good times and bad. In fact, during recessions, nicotine use can even increase as people look for ways to cope with added stress.

Image source: Getty Images.

That said, most consumer staples products are necessities, like food and toiletries. Tobacco companies can't make that claim, since using nicotine is a personal preference, not something that all people have to do.

In fact, the most popular tobacco product, the cigarette, has come under intense scrutiny in recent years because of the negative health consequences of smoking. Which is where Altria and Philip Morris International find their common ground.

Both companies sell the same cigarette brands, most notably Marlboro. Altria, as previously mentioned, does this in North America. Philip Morris sells the brand in the rest of the world.

Altria spun off Philip Morris International in 2008 primarily to allow each entity to focus on its respective market and to better manage legal and regulatory challenges. Philip Morris gained more freedom from U.S. litigation and regulation, while Altria could concentrate on the domestic market and better respond to a massive tobacco settlement with the U.S. government. The split also aimed at unlocking the potential of PMI's faster-growing international business and improving financial flexibility for both companies. The breakup was the start of a string of mistakes for Altria that should leave long-term investors far more interested in Philip Morris.

Altria's big problem

In 2024, Altria's cigarette volumes fell 10.2%. That's a truly horrible number, but it was just a continuation of a trend in its core market. Philip Morris' cigarette volumes rose 0.6% in 2025. That's hardly a massive success, but it is massively better than what Altria achieved and makes Philip Morris a far more attractive business.

However, the real story here is that Altria ultimately spun off its best business when it separated out Philip Morris. This isn't the only mistake Altria has made. It also bought into Juul and a marijuana company, with both ending badly, including massive write-offs. If you believe in three strikes and you're out, Altria should be out of the running already. In its defense, Altria has done well with a 10% investment in Anheuser-Busch InBev stock.

Altria does offer one thing that many investors crave: an ultra-high dividend yield of 6.9%. Philip Morris' yield, by comparison, is only 3.1%. A material reason for that difference is that Philip Morris' business is doing much better, and the stock isn't trading at such a steep discount (better stock performance tends to lower the dividend yield, and vice versa).

Notably, a big part of the reason Philip Morris is doing better is its smoke-free business, which makes up nearly 39% of its revenue and almost 40% of its gross profit. In other words, the company is far along in the process of shifting away from cigarettes. And that includes selling non-cigarette products in the North American market. Altria effectively created a new competitor when it spun off Philip Morris.

While Altria appears to be doing better with its second attempt in the vaping space (NJOY), it is still dependent on cigarettes for nearly 90% of the income statement's top line. It is nowhere near as far along as Philip Morris in what is probably the most important transition in the cigarette makers' history.

Altria for the short term, Philip Morris for the long term

Given the nature of cigarettes, Altria Group's lofty yield is probably safe for the time being. Indeed, it has been able to use price increases to offset the volume declines it has faced.

So income investors looking for a high-yield safe haven during the current market turbulence can reasonably expect the dividend to keep being paid over the near term. It is the long term that's the big question mark.

If you think in decades and not days, Philip Morris International, despite the lower yield, has clearly differentiated itself from its former parent. And if you have a buy-and-hold philosophy, it is likely to be the more attractive option for you because its business is much better positioned today.

Should you invest $1,000 in Philip Morris International right now?

Before you buy stock in Philip Morris International, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Philip Morris International wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $594,046!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $680,390!*

Now, it’s worth noting Stock Advisor’s total average return is 872% — a market-crushing outperformance compared to 160% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

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