Why Altria Is a Must-Buy S&P 500 Dividend Stock at a 14% Discount

In today's volatile market, investors are scrambling for safe harbors-stocks that offer stability, predictable cash flows, and a margin of safety. Altria Group (MO) fits this mold perfectly. With a current price-to-earnings (P/E) ratio of 11.1, the stock trades at a compelling discount to its historical average of 18.99 and the Consumer Defensive sector benchmark of 20.17. This 42% undervaluation relative to its own history and 43.9% discount to its estimated intrinsic value make Altria a standout candidate for defensive investors seeking long-term, high-yield opportunities.

A P/E Discount That Can't Be Ignored

Altria's valuation is screaming "buy." As of November 2025, its P/E ratio of 11.1 is not just below its 10-year average but also significantly lower than the Tobacco sector's 15.28 and its peer Philip Morris International's 27.62. The company's forward P/E of 10.5x is even more striking, trading at a 14% discount to its industry's 14.3x average. This gap suggests the market is underestimating Altria's earnings power and its strategic pivot toward smoke-free products.

A discounted cash flow (DCF) analysis further reinforces this view. Altria's stock is trading at $58 per share, while its intrinsic value is estimated at $103.67, implying a 43.9% undervaluation. For value investors, this is a rare opportunity to buy a blue-chip S&P 500 constituent at a price that doesn't reflect its fundamentals.

Earnings Growth: A Quiet Engine of Resilience

Altria's financials tell a story of consistent growth. In 2025, the company reported adjusted diluted EPS of $2.67 for the first half, a 7.2% increase from $2.49 in the same period in 2024. Full-year guidance of $5.37 to $5.45 per share reflects a 3.5% to 5% growth rate from 2024's $5.19, driven by share repurchases and operational efficiency.

Altria's disciplined capital allocation-returning $1.1 billion to shareholders via dividends and buybacks in the first half of 2025-has amplified earnings per share. Even as traditional tobacco faces headwinds, Altria's ability to grow earnings while maintaining a 78% payout ratio underscores its financial strength.

Smoke-Free Innovation: Future-Proofing a Legacy Business

Critics once dismissed Altria as a "dying" industry play, but its $25 billion investment in smoke-free products has transformed its trajectory. The launch of on! PLUS nicotine pouches in 2025, using proprietary NICOSILK mesh technology, marks a strategic pivot toward modern oral nicotine. These products, available in mint, wintergreen, and tobacco flavors, are already gaining traction in key markets like Florida and Texas.

Altria's partnerships are equally compelling. A collaboration with KT&G, a South Korean tobacco giant, aims to expand its footprint in non-nicotine and international markets. Meanwhile, its joint venture with Ploom for heated tobacco products has shown promise: 31.5% of users quit smoking entirely, and 42.1% reduced consumption by over 50%. These initiatives position Altria to navigate regulatory risks while capturing growth in adjacent categories.

Dividend Sustainability: A Lifeline for Defensive Investors

Altria's 7.33% dividend yield is a magnet for income-focused investors, but sustainability is the real story. The company has raised dividends for 53 consecutive years, with a 10-year compound annual growth rate of 6.74%. At a payout ratio of 78%, the dividend is well-covered by earnings, and management's target of mid-single-digit annual growth signals confidence in its ability to balance shareholder returns with reinvestment.

This track record is critical in a market where bond yields are rising and cash is king. Altria's high yield and growth trajectory offer a rare combination: a "bond-like" stock with equity upside.

Why This Is a Must-Buy Now

Altria's 14% P/E discount to industry peers is more than a valuation anomaly-it's a reflection of market skepticism about its transition to smoke-free products. But the data tells a different story: earnings are growing, innovation is accelerating, and the dividend is secure. For defensive investors, this is a stock that offers downside protection and upside potential.

In a world where volatility is the norm, Altria's low P/E, resilient earnings, and high yield make it a cornerstone of a balanced portfolio. As the market corrects its undervaluation, shares could see meaningful re-rating-making now the optimal time to buy.

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