2025 Tobacco Stocks List | The 5 Best Now, Ranked In Order

Updated on January 28th, 2025 by Bob Ciura

As a business owner, selling products that have high profit margins along with strong brand awareness and an exceptionally loyal customer base is strongly desirable.

This allows for predictable revenue and high levels of profits over time.

The tobacco industry fits this model, despite declines over time in the number of customers that use its products.

Tobacco stocks are particularly attractive to income investors thanks to their generous dividends and defensive characteristics during economic downturns.

Tobacco stocks produce a lot of cash, but have very little capital expenditure needs, creating what could be considered perfect income stocks.

You can download a spreadsheet with all our tobacco stocks (along with important financial metrics such as dividend yields and price-to-earnings ratios) using the link below:

Click here to instantly download your free spreadsheet of all Tobacco Stocks now, along with important investing metrics.

Tobacco stocks are widely prized by income investors thanks to their high dividend yields, stable payouts and dividend increase streaks. However, declining customer counts and usage rates are weighing on the group.

This article will analyze the prospects of 5 of the largest tobacco stocks that we cover in the Sure Analysis Research Database. Rankings are in order of projected total returns from worst to best.

You can instantly jump to any individual stock analysis by clicking on the links below:

Industry Overview: Declining Smoking Rates
Imperial Brands plc (IMBBY)
Philip Morris International (PM)
Altria Group (MO)
British American Tobacco (BTI)
Universal Corp. (UVV)

But first, we’ll take a look at the tobacco industry’s primary concern, which is declining tobacco usage.

Industry Overview: Declining Smoking Rates

The percent of the U.S. population that smokes is in a continuous decline, and has been for decades.

Source: American Lung Association

The percent of the U.S. smoking adult population has steadily declined from 42% in 1965, to just 11.6% as of 2021. The declines among the youth population have been even bigger.

Young people now have a smoking rate of about one in 25. This sort of decline in an industry’s customer group generally spells trouble for the companies that operate within it.

Other forms of tobacco usage have seen similar rates of decline, including smokeless tobacco. This has been the case with every demographic group, so it is widespread among all of the companies’ potential customers.

Not only are fewer people smoking, but the ones that do are smoking less than they used to.

Source: American Lung Association

The number of people smoking at least 15 cigarettes a day has plummeted in the past few decades. Today, the overwhelming majority of smokers use fewer than 15 cigarettes daily.

In other words, there are fewer customers for the industry. And, the ones that remain are using fewer products. This has negatively impacted demand from two directions.

This has led to much lower volumes of total cigarettes sold, producing a declining total to be split up among the various companies selling cigarettes.

An increasing number of U.S. states have significantly raised the tax on cigarettes to reduce their budget deficits, and to reduce the potential appeal of smoking for consumers.

Given the propensity of localities to use tax increases on cigarettes, the situation will likely only get worse for tobacco stocks.

In addition, pricing increases have the impact of reducing usage further. Demand will almost certainly continue to decline as taxes and prices rise. Indeed, health organizations like the American Lung Association actively encourage localities to raise taxes on cigarettes and other tobacco products to discourage usage.

To make matters worse for tobacco companies, most of the world’s smoking population rate looks much the same as the above chart. It has become abundantly clear that consumers around the world are eschewing tobacco products for health concerns.

These negative trends have kept many investors away from tobacco stocks. However, tobacco stocks can still generate solid total returns given that they tend to offer high dividend yields.

The key behind an investment in tobacco stocks is the inelastic demand for cigarettes relative to their price due to the addictive nature of these products.

Tobacco companies have been able to raise their prices to help offset declining smoking rates. As a result, they have exceptional growth records.

In addition, population growth partly offsets the effect of the declining percent of smokers.

However, investors must keep in mind that the total volumes for the industry are in fairly steep decline, and all indications are that this is irreversible.

Tobacco Stock #5: Imperial Brands plc (IMBBY)

5-year expected returns: 0.3%

Imperial Brands is a tobacco company that was founded in 1901. Today, it is headquartered in the United Kingdom. The company manufactures and sells a variety of tobacco products, including cigarettes, tobaccos, cigars, rolling papers, and tubes.

Some of its core brands include Winston, Davidoff, Gauloises, L&B, Bastos, Fine, Gitanes, Kool, Jade, and many more.

The company is organized into two operating segments, tobacco and logistics. The tobacco segment includes the manufacture and sale of its various tobacco products, while the logistics segment distributes tobacco to product manufacturers.

On November 19th, 2024, Imperial Brands reported results for fiscal year 2024 for the period ending September 30th, 2024. For the fiscal year, net revenue fell 0.2% on a reported basis, but was flat on a constant currency basis.

Tobacco pricing and mix improved 6%, which was partially offset by a 3.5% decrease in volume.

Click here to download our most recent Sure Analysis report on IMBBY (preview of page 1 of 3 shown below):

Tobacco Stock #4: Philip Morris International (PM)

5-year expected returns: 6.1%

Philip Morris International was spun off from Altria in 2008, and is charged with the production and distribution of Altria’s products outside of the United States. This distribution includes the exceedingly valuable Marlboro brand.

On October 22nd, 2024, Philip Morris reported its Q3 results for the period ending September 30th, 2024. For the quarter, the company posted net revenues of $9.91 billion, up 8.4% year-over-year.

Adjusted EPS was $1.91, up 14.4% compared to Q3 2023. In constant currency, adjusted EPS grew by an even greater 18.0%.

Total shipment volumes were up 2.9% collectively, driven by growth across the board. It was also encouraging to see that combustibles experienced a rise in volume, effectively sustaining their positive trajectory after years of declines.

Specifically, shipment volumes in cigarettes, heated tobacco, and oral products rose 2.9%, 8.9%, and 22.2%, respectively. The Swedish Match buyout significantly contributed to the increase in oral products’ shipment volumes.

Click here to download our most recent Sure Analysis report on Philip Morris International (PM) (preview of page 1 of 3 shown below):

Tobacco Stock #3: Altria Group (MO)

5-year expected returns: 6.5%

Altria is a tobacco stock that sells cigarettes, chewing tobacco, cigars, e-cigarettes, and more under a variety of brands, including Marlboro, Skoal, and Copenhagen, among others.

The company also has a 35% investment stake in e-cigarette maker JUUL, and a 45% stake in the cannabis company Cronos Group (CRON).

Altria reported solid third-quarter results, driven by the resilience of its smokeable products and the continued market momentum of the on! nicotine pouch brand.

Source: Investor Presentation

The company’s Q3 revenue was $5.34 billion, a 1.3% year-over-year increase, with adjusted earnings per share (EPS) reaching $1.38, exceeding expectations by $0.03.

Altria also reaffirmed its full-year EPS guidance range of $5.07 to $5.15, indicating growth of 2.5% to 4% over 2023.

During the quarter, Altria repurchased 13.5 million shares, spending $680 million, and declared dividends of $1.7 billion. The company has $310 million remaining under its repurchase program, anticipated to complete by year-end.

Click here to download our most recent Sure Analysis report on Altria (preview of page 1 of 3 shown below):

Tobacco Stock #2: British American Tobacco (BTI)

5-year expected returns: 6.7%

British American Tobacco is one of the largest tobacco companies in the world. It owns the following tobacco brands, among others: Kool, Benson & Hedges, Dunhill, Kent, and Lucky Strike.

British American Tobacco reported its pre-close trading update for 2024 in December.

Management indicated that British American Tobacco is on track to hit its fiscal 2024 guidance, also stating that results have improved in the second half of the year so far.

The company’s “New Categories” business is a major growth driver, as it was in the previous couple of years as well.

Organic growth due to rising cigarette prices and the rise of vaping products should be positive for revenues, and declining interest expenses due to debt paydown could impact profitability as well.

On top of that, British American Tobacco is buying back its own shares recently, which will have a positive impact on earnings-per-share going forward.

Click here to download our most recent Sure Analysis report on BTI (preview of page 1 of 3 shown below):

Tobacco Stock #1: Universal Corporation (UVV)

5-year expected returns: 8.2%

Universal Corporation is a market leader in supplying leaf tobacco and other plant-based inputs to consumer product manufacturers.

The Tobacco Operations segment buys and sells tobacco used to make cigarettes, cigars, pipe tobacco, and smokeless products.

Universal buys tobacco from its suppliers, processes it, and sells it to large tobacco companies in the US and internationally.

Source: Investor Presentation

The Ingredient Operations deal mainly with vegetables and fruits but is significantly smaller than the tobacco operations. Universal has been growing this business through acquisitions starting in 2020.

Universal Corporation reported its second quarter earnings results on November 7. The company generated revenues of $710 million during the quarter.

Additionally, Universal Corporation sold carryover crops during the period, which added to the company’s revenue performance.

Click here to download our most recent Sure Analysis report on Universal (preview of page 1 of 3 shown below):

Final Thoughts

Tobacco stocks as a group have had a difficult time in the past couple of years. Regulatory and consumer preference changes continue to plague the group.

But valuations are relatively low, dividend yields are high, and most companies are diversifying away from tobacco. Vector Group now offers the best total projected annual returns, but all of these companies offer high dividend yields.

We see Universal, BTI, and Altria as offering the highest expected total returns. And, all offer sizable dividend yields.

Dividend sustainability varies by stock in this group, but overall, there is a lot for income investors to like when it comes to these 5 tobacco stocks.

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