You May Not Realize It But You Need Altria In Your Portfolio

Let us hit you with a fact that defies conventional wisdom: a company with negative revenue growth has outperformed the S&P 500 over the past 5 years, delivered mid-double-digit annual returns not counting in dividends, offered an attractive 6.7% dividend yield, and served as a market crash hedge – all while sporting less volatility than your average tech darling. Welcome to the enigma – Altria Group (NYSE: MO). 

The maker of Marlboro might not win headlines, but it just might deserve a seat at the heart of your portfolio. We say portfolio, because investing in a single or handful of stocks is a risky endeavor no matter how attractive the numbers look. We take risk minimization to heart in our High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.

Image by Krzysztof Dzwonek from Pixabay

Let’s Talk Numbers & You’ll Be Surprised

• 15.6% Annualized Return Over 5 Years – add in the 6.7% dividend, and you’ve got a total return that beats the S&P 500 by a good margin. This is not a one-off outperformance. It’s structural. It’s repeatable. And it’s hiding in plain sight.
• Cash Flow Machine on Fire Sale – Altria rakes in $8.6 billion in free cash flow on a revenue base of just $20.4 billion – a staggering 42% free cash flow margin. That’s Silicon Valley-level profitability without the frothy multiples. The operating margin? A mind-blowing 55%+. This business spits cash like it’s chewing tobacco.
• And with a debt-to-equity ratio of just 25%, there’s no looming credit bomb waiting to go off.

Now the kicker? All of this is available at a P/E of less than 10. That means you’re paying a cheap price for a business that’s already giving you an 8% free cash flow yield, and 11% earnings yield. 

But Wait – Isn’t the Business Dying?

Here’s the thing: Altria hasn’t grown revenue. In fact, its 3-year average revenue growth is slightly negative (-1.1%). And you know what? It doesn’t matter.

Why? Because this isn’t a story about top-line expansion – this is about capital efficiency, cash returns, and defensive stability. MO doesn’t need to grow to generate wealth. It needs to operate. And it does that better than many.

An All-Weather Stock in a Rainstorm Market

Think MO is just for bull markets? Think again. In 2022, while the S&P 500 tanked nearly 20%, MO returned +4.4%. And in 2025 (so far), with markets down 8%, MO is up +11.2%. This is your portfolio’s built-in umbrella. It gets even better. Since December 2020, MO’s annualized volatility is just 20.5%, barely higher than the S&P 500’s 18%. For a stock with market-beating returns and good yields, this is remarkably tame behavior.

So, how does a tobacco company still thrive in 2025? Pricing power, addictiveness, and a fiercely loyal customer base. Combine that with decades of operational discipline and a narrow product focus, and you’ve got a business that operates more like a utility than a consumer brand.

Does it mean you should always hunt for these type of stocks? Of course not. The market has much to offer. Combining stocks across different categories to maximize upside while minimizing risk/volatility is what we do in Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.