Stock to Buy Now: Altria vs. British American Tobacco

Altria (NYSE: MO) and British American Tobacco (NYSE: BTI) are global cigarette giants. Altria pays 9.3% and British American Tobacco 9.8%, both high dividend rates. That's the key reason most investors will care about either company. Which high-yield stock is best?  

They may be best avoided together. Before deciding if Altria or British American Tobacco is superior, consider another topic. Even want to own a tobacco company? Huge dividend rates are appealing, but the companies that sustain them are declining secularly. Altria vs. BATC  

Altria produced 109.8 billion cigarettes in 2018. The number dropped to 76.3 billion by 2023. A 30% reduction is definitely not a good trend, as shown by simple math. Same with British American Tobacco. Around 700 billion cigarettes were made in 2018. The 2023 number was 555 billion. The decline is about 21%.  

Buying any company means investing in a struggling firm. Both firms have raised cigarette pricing to counteract volume decreases. Price hikes worsen volume reductions after a certain point. Both high-yield equities are likely to disappoint conservative income investors.  

Better news for British American Tobacco than Altria If that warning doesn't deter you from these cigarette companies, which is better? British American Tobacco looks to be the answer. This has two basic causes.  

First, Altria's business is limited to the U.S. market after its split from Philip Morris International (NYSE: PM), which controls Philip Morris brands elsewhere. The U.S. has been trying to discourage smoking, and the sector has been declining for years. Altria is at a strategic disadvantage compared to British American Tobacco, which sells cigarettes worldwide, because this is its only market.  

Smoking is declining worldwide, but each market is different. British American Tobacco's 2023 organic revenue increase was 0.6%. U.S. performance was negative 6.4%, but the rest of the globe gained 6.8%. That doesn't address volume declines, but it shows British American Tobacco's global portfolio gives it options.  

Second, Altria has made too many strategic mistakes. The first was separating its U.S. and overseas businesses. Philip Morris International has been a rival since entering the U.S. market with non-cigarette products. However, disastrous investments in Juul and a marijuana startup led to huge write-offs after that divorce. Altria recently bought NJOY to try vaping again. That vape company is further along, so the end may be better, but the list of faults is still worrying.  

For instance, British American Tobacco reported profitability in 2023 for its new categories, or non-cigarette operations. The company achieved profitability two years ahead of internal targets. British American Tobacco appears to be outperforming Altria in pushing beyond cigarettes.  

The stronger of two struggling firms Altria and British American Tobacco face major difficulties in their core businesses. Despite the high dividend yields, most investors will likely stay away. If you're ready to take a risk, British American Tobacco has a global reach and is performing well (relatively well with non-cigarette investments). It appears that British American Tobacco is the better tobacco behemoth.  

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