This Ultra-High Dividend Stock Is Yielding 7%: Should You Buy It With $1,000 Right Now?

Brett Schafer, The Motley Fool

Sat, Apr 5, 2025, 3:23 PM 5 min read

Stocks are falling. Financial TV is rolling retired the "Markets successful Turmoil!" headlines. Uncertainty abounds implicit however overmuch President Trump's tariffs volition interaction the U.S. economy. Both the broader Nasdaq Composite and the big-tech dense Nasdaq-100 indexes are present down by much than 12% from their aboriginal January peaks arsenic investors instrumentality their wealth retired of higher-risk maturation stocks, further fueling people's fears.

Not each stocks are falling, though. In times of uncertainty, investors thin to fly to information successful the signifier of low-risk dividend-paying stocks similar Altria Group (NYSE: MO). The baccy and nicotine elephantine is up astir 10% twelvemonth to day and inactive sports a dividend with a 7% yield. With those facts successful mind, should you bargain Altria banal with $1,000 close now?

Altria is the genitor institution of Philip Morris USA, which chiefly sells cigarettes successful the United States nether an array of brands including Marlboro, its best-selling marque by far. While cigarettes are inactive smoked widely, income volumes successful the U.S. person been declining for decades now, and they proceed to. In the 4th quarter, Altria's cigaret income measurement fell by astir 8% twelvemonth implicit year.

Despite that, Altria's nett gross aft excise taxes grew by 1.6% year-over-year to $5.1 cardinal past 4th arsenic the institution boosted its prices connected packs of cigarettes by much than capable to marque up for the mislaid sales. Its pricing powerfulness has allowed it to support revenues rising successful the look of measurement declines for galore years, portion besides expanding nett margins for the smokeables division. In 2024, smokeables operating income grew 1.4% to $10.8 billion, making up the bulk of Altria's profits. With a 60% operating margin, the smokeables part is 1 of the astir profitable businesses successful the world.

Over the agelong term, Altria plans to importantly turn its smoke-free division, which includes nicotine pouches, physics vaping, and perchance different products similar heat-not-burn devices. By 2028, absorption wants to treble income of its smoke-free products to $5 billion, which would beryllium a sizable percent of Altria's existent yearly gross of $20 billion. However, the institution is good down rivals specified arsenic Philip Morris International, wherever smoke-free products are adjacent to making up 50% of wide income close now. This volition beryllium an important conception for investors to way for the remainder of the decade.

Altria's underlying concern is highly profitable, but it's a low-growth market. The smoke-free products conception has immoderate promise, but for now, it's a tiny portion of the operation. The champion diagnostic of this banal for investors mightiness beryllium management's superior instrumentality strategy.