Own This Cigarette Stock Or Treasuries?

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The 5-year U.S. Treasury yield stands at 5.04%. Arguably, U.S. sovereign debt is the safest investment in the world. A bit of doubt has crept in as U.S. debt topped $40 trillion. However, it remains a “sure thing” from an investment safety standpoint.

As an alternative to the five-year U.S. paper, an investor could own stock in the tobacco company Altria (NYSE: MO). It has a 6.5% yield. It has raised its dividend 61 times in the last 57 years. Its stock is up 5% in the last year. The U.S. may go out of business before Altria does. People will keep smoking for close to forever. Altria has a rock-solid balance sheet and unspectacular but solid revenue year after year.

In the most recent quarter, revenue was flat at $6.1 billion. EPS was down 3% to $1.37.

Altria’s revenue has one primary driver: Marlboro, the world’s most famous cigarette brand. It has some other cigarette revenue and a very modest contribution from smokeless tobacco. You shouldn’t count either of those as meaningful for sales.

Altria is a lesson in investing, particularly for those who want yield. Several companies are over a century old and pay dividends around 6%. And those payments are not going anywhere. This list includes General Mills (NYSE: GIS), Kraft Heinz (NYSE: KHC), and Pfizer (NYSE: PFE). Will their prices rise and fall? Certainly, but none is likely to swing wildly.

More than a whisper suggests that a stock market that relies this much on one factor faces trouble. AI has driven the market up. Concerns that adoption won’t keep soaring and that AI data centers will get expensive could drag it down. Is it a dot-com bubble? Probably not, but the market could certainly reset down 20% to 30%. A recovery could take years if another driver doesn’t replace AI.

When is it time to buy a safe dividend stock? About the same time as buying a 5-year U.S. Treasury. Given demand for its 5% yield, the evidence suggests now is that time.

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