Altria (MO 1.90%), the largest tobacco company in America, is a divisive stock. The bulls love its stable earnings growth and rising dividends, but the bears claim it will eventually run out of room to grow as smoking rates decline.

For now, the bulls are winning. Over the past five years, Altria's stock rallied nearly 40% and delivered a total return of almost 110% after including its reinvested dividends. But can it keep climbing higher over the next five years?

Below, I'll check in on its business model, its long-term plans to diversify away from cigarettes, and its valuations to decide.

Image source: Getty Images.

What happened to Altria over the past five years?

From 2019 to 2024, Altria's annual shipments of smokeable products (cigarettes and cigars) declined from 103.45 billion sticks to 70.34 billion sticks. During those five years, the company's retail share of the domestic cigarette market shrank from 49.7% to 45.9%, while its flagship Marlboro brand's share slipped from 43.1% to 41.7%.

Those declines can mainly be attributed to declining smoking rates, rising excise taxes, and tougher competition. To offset that pressure, Altria consistently raises its prices, cuts costs, and buys back shares to boost its earnings per share (EPS) and dividends.

Over the past five years, the company bought back 9% of its shares. It also sold roughly a fifth of its stake in AB InBev last year and spent $2.4 billion of those proceeds on an accelerated buyback plan. It's raised its dividend every year since it spun off its overseas business as Philip Morris International in 2008.

To diversify its top line away from cigarettes and cigars, Altria is selling more smokeless products like snus, nicotine pouches, heated tobacco capsules, and e-cigarettes. To accelerate that transformation, Altria acquired the e-cigarette leader Njoy for $2.8 billion in 2023. However, it doesn't expect that investment to boost its EPS until 2026.

From 2019 to 2024, Altria's revenue (net of excise taxes) rose at a compound annual growth rate (CAGR) of less than 1% from $19.8 billion to $20.4 billion, but its adjusted EPS grew at a faster CAGR of 4%. Those growth rates might seem anemic but indicate its price hikes and cost-cutting strategies are still working.

What will happen to Altria over the next five years?

Over the next five years, Altria will likely follow the same playbook. It still generated 87% of its revenue (net of excise taxes) from its smokeable products in 2024, but investors will see if that percentage declines as it rolls out more smokeless products.

If Altria's sales of Njoy e-cigarettes and other smokeless products keep climbing, it will offset some of the pressure on its core cigarette business. Investors should expect the company to keep raising the prices of smokeable products to offset slower shipments and market-share losses, but that's a finite strategy which could eventually run out of steam.

For 2025, Altria expects its adjusted EPS to grow 2% to 5%. It plans to keep expanding its smokeless business with Njoy, its On nicotine pouches (which are now separately managed by its Helix Innovations subsidiary), and new heated tobacco products. Njoy should also start to boost its free cash flow (FCF) this year. Altria spent more than 100% of its FCF on dividends and buybacks in 2024 and plans to keep returning that cash to shareholders for the foreseeable future.

Analysts expect Altria's adjusted EPS to rise 4% in 2025 and 3% in 2026. If its adjusted EPS continues to rise at a CAGR of 3% over the following four years, it could reach $6.21 in 2030. Assuming shares are still trading at 11 times forward earnings, its stock would rise nearly 20% to about $68 by the beginning of 2030.

If Altria maintains its current payout ratio of 61%, its dividend would rise to $3.78 per share -- which would represent a 5.6% yield at $68. That would be lower than its current forward yield of 7.1% but could still attract a lot of income investors if interest rates decline over the next five years. While Altria's stock won't blast off, it could still be a reliable blue chip dividend stock as the broader market endures some wilder swings.