Altria vs. Philip Morris: Higher Income Now or Faster Dividend Growth?

Altria (NYSE:MO | MO Price Prediction) and Philip Morris International (NYSE:PM) both reported third-quarter results in October. They pay out almost the same share of earnings: 88.5% for Altria and 87.7% for Philip Morris. Their yields, though, are far apart. Altria yields 5.53%, and Philip Morris yields 2.98%. That gap shows how the market prices a shrinking U.S. cigarette business against global smoke-free growth.

Marlboro Smokers Trade Down While IQOS Keeps Climbing

Altria’s cigarette volumes are still shrinking, just a little more slowly than the industry. Adjusted domestic shipments fell 4%, compared with an estimated 5% industry decline. Part of the help came from smokers switching to cheaper brands. Marlboro’s retail share slipped 1.0 point to 39.5%, and discount brands rose to 34.1% of the category. Management’s answer is Marlboro Cowboy Cut, which it described as “a premium Marlboro option at the right price to retain value-sensitive smokers.” To me, that is a defensive move. In nicotine pouches, on! volume rose 13.3%, but its share of the pouch category fell to 13.5%. Rivals are growing faster.

Philip Morris grew organic revenue 7.1%. Adjusted EPS came in at $2.36, above the $2.3425 consensus. IQOS in-market sales rose 7.1%, VEEV vape shipments jumped 61.6%, and price increases on international cigarettes added 8.9%. CEO Jacek Olczak called it “another excellent quarter.”

Altria Pulls Cash Out While Philip Morris Reinvests

Altria raised its 2026 adjusted EPS guidance to $5.66 to $5.74 and added a $1B increase to its buyback program. Operating cash flow of $3.108 billion in the quarter easily covered $1.774 billion in dividends. Some of the earnings increase came from Altria’s stake in beer maker Anheuser-Busch InBev (NYSE:BUD), where equity income rose to $228M from $123M. Altria has no control over that income.

Philip Morris has no buybacks planned. It is using cash to cut its debt ratio toward 2.0x. Smoke-free products already bring in more than 40% of net revenue. Management expects about $13.5 billion in operating cash flow this year to pay for both growth and the dividend.

Fourth Quarter Will Show the Cost of ZYN’s Price Reset

Philip Morris expects its U.S. adjusted operating income to come in around zero or slightly negative in the fourth quarter. ZYN is moving to 20-pouch cans, which bring in about 25% less revenue per pouch. Energy costs tied to the Middle East and disruptions in Ukraine add about one point of drag on growth. I want to see whether higher ZYN volume makes up for the lower price.

For Altria, watch how many smokers keep moving to discount brands. NJOY ACE also still has no return-to-market date.

Which Dividend Profile Fits Retirement Income Goals Best

For a retiree who wants reliable income that keeps growing, Philip Morris has the stronger growth profile. Its payout ratio is about the same as Altria’s, but its earnings are growing, and its latest dividend hike was bigger. Negative shareholders’ equity of -$5.945B and currency swings mean it runs real risk.

Altria fits a retiree who wants the most cash today and can live with a shrinking core business. Its record of 61 increases in 57 years and its goal of mid-single-digit dividend growth through 2028 support that case. My view would change if on! stops losing share or if ZYN’s reset stalls.

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