Philip Morris International Inc. (NYSE:PM) and Altria Group, Inc. (NYSE:MO) often come up in the same conversation when investors look for tobacco dividend stocks. Both have long histories of returning cash to shareholders, but their dividend stories are starting to look quite different.
Altria offers much more income upfront, while Philip Morris is growing its payout faster and has moved further along in its shift toward smoke-free products.
Photo by Vitaly Taranov on Unsplash
The Growth Gap
Philip Morris International Inc. (NYSE:PM) currently pays $1.47 per share each quarter, or $5.88 annually, after increasing the dividend by 8.9% in September 2025. It has raised the payout every year since becoming an independent public company in 2008. Since then, the dividend has grown 219.6% in total.
Altria Group, Inc. (NYSE:MO)’s latest increase, announced in August 2025, was more modest at 3.9%, taking the quarterly dividend to $1.06 per share, or $4.24 annually. It was Altria’s 60th dividend increase in 56 years, an exceptional record. The pace has clearly slowed, though. Management expects dividend growth in the mid-single digits through 2028, below PMI’s recent rate of increase.
The Income Gap
Dividend growth does not tell the whole story. Altria Group, Inc. (NYSE:MO)’s $4.24 annual payout, based on a recent share price of about $64, gives the stock a yield of roughly 6.6%. Philip Morris International Inc. (NYSE:PM), with its $5.88 annual dividend and a share price near $185, yields about 3.2%. Put simply, an investor buying Altria today gets roughly twice the current income offered by Philip Morris.
That starting gap matters. Even with its faster dividend growth, Philip Morris would need more than a decade of compounding increases to catch up with Altria’s starting yield on a yield-on-cost basis, assuming Altria keeps raising its own payout at a modest pace. For investors focused on income right now, that makes Altria hard to ignore.
What’s Behind Philip Morris’ Growth
Philip Morris International Inc. (NYSE:PM)’s dividend growth is closely connected to its move into smoke-free products. In the second quarter of 2026, net revenue rose 10.4% to $11.2 billion, while adjusted diluted EPS increased 15.2% to $2.20. Smoke-free shipments grew 7.5%, and products such as IQOS and ZYN made up about 42% of total revenue.
That shift matters for the dividend over the long run. PMI is reducing its dependence on a mature cigarette business while building categories with stronger growth prospects. The company generated $12.2 billion in operating cash flow in 2025, giving it room to keep funding the dividend while investing in its smoke-free portfolio.
The trade-off comes down to valuation and starting yield. A 3.2% yield is not particularly high for a tobacco stock, and PMI’s stronger growth outlook means investors are paying more for its future earnings. That leaves less room for things to go wrong. If growth in IQOS or ZYN slows materially, the stock could come under more pressure because some of that future growth is already reflected in its valuation.
What’s Behind Altria’s Yield
Altria Group, Inc. (NYSE:MO)’s biggest strength is the amount of cash its business can generate without requiring heavy reinvestment. The company produced about $9.3 billion in operating cash flow in 2025. During the first half of 2026, it returned nearly $3.9 billion to shareholders through dividends and buybacks, including $3.6 billion in dividends.
Its core cigarette business also requires relatively little capital spending to maintain, leaving a large share of that cash available for shareholders. Altria is still producing some growth. Adjusted diluted EPS rose 4.9% in the first half of 2026, while management narrowed its full-year guidance to $5.61-$5.72 per share. The company is also expanding its smoke-free business, led by its on! nicotine pouch brand. On! PLUS reached 120,000 stores nationwide during the second quarter.
That transition is not as advanced as PMI’s. Altria’s broader oral tobacco segment also faced revenue pressure during the same period, showing that the company’s move away from cigarettes is still a work in progress. The longer-term concern is fairly simple. Cigarette volumes are falling, and pricing can only make up for those declines for so long. Altria needs its smoke-free products to become a much larger part of the business before that trend becomes a more serious problem. The portfolio is not there yet.
The Bottom Line
Both companies have strong dividend records, but they fit different income strategies. Altria Group, Inc. (NYSE:MO) stands out for investors who want more income today. Its 6.6% yield, supported by strong cash generation and a 56-year record of dividend increases, gives it a clear advantage on current income. The biggest concern remains the long-term decline in cigarette volumes.
Philip Morris International Inc. (NYSE:PM) makes more sense for investors who are willing to accept a lower starting yield for faster dividend growth and a business that has made more progress in moving away from traditional cigarettes. Smoke-free products already account for about 42% of revenue and continue to grow at a strong pace.
PMI’s dividend has more room to grow over the next several years, but closing the income gap with Altria will take time. For investors who care most about income today, Altria has the advantage. For those willing to sacrifice some current yield for faster dividend growth and a more advanced business transition, Philip Morris has the stronger case.
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Disclosure: None. This article is originally published at Insider Monkey.
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