While ethical investors may opt to steer clear, top tobacco stock Altria Group (MO) currently boasts the highest dividend in the S&P 500 with a smoking-hot yield.

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Altria, best known for its iconic Marlboro cigarettes, was formed from a 2007 spinoff from Philip Morris (PM). Altria took control of U.S. tobacco interests, prioritizing dividend growth and share buybacks, while Philip Morris focused on the international market.

Altria Boasts Smoking Hot 8.9% Yield

Boasting an 8.9% yield Altira is currently the highest-yielding stock in the S&P 500. The company has a long history of dividend growth, including its parent company, which stretches back to 54 consecutive years of dividend increases.

While many high-yielding stocks have substantial risks to investors, Altira is on solid financial footing. the dividend stock boasts an investment grade (A-) debt rating by S&P Global. The company also offers investors significant value, trading at a price-earnings ratio of just 9.

That modest valuation is due to a long-term secular decline in tobacco sales, which shows no signs of abating. Altria’s first-quarter results on April 25 saw revenue decline 2.5% year-over-year to $5.58 million.

Nevertheless, despite industrywide weakness, Altria Group maintained its dominance with retail share of Marlboro brands at 42% of the domestic market, unchanged from a year prior. That consumer stickiness is reassuring, considering fears that inflation could cause consumers to switch to some of Marlboro’s cheaper competitors.

Dividend Stock’s Vaping Business Growing

Altria also continues its expansion into vape products to cater to younger consumers. After acquiring cigarette and vaping company NJOY for $2.75 billion last June, the company has been quickly expanding production. It shipped 11.9 million units in the first quarter.

While uncertainty remains over the regulatory landscape around e-cigarettes, shares of Altria have remained stable. They’ve remained mostly between the 40-50 range over the past five years.

The dividend stock is trading above both the 50- and 200-day moving averages. The stock is forming a flat base with a 45 buy point, according to MarketSurge pattern recognition.

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