If I Had $5,000 to Put Toward Just 1 Dividend Stock, This Would Be It
Altria is still a reliable blue chip stock for income-oriented investors.
In the world of investing, fixed-income instruments such as certificates of deposit (CDs) and bonds often seem like a more secure choice than dividend stocks, given their guaranteed returns and the necessity to raise yields as interest rates climb. However, fixed-income investments do not offer significant appreciation to their principal, unlike many blue chip stocks which tend to grow over the long term.
Moreover, reinvesting dividends during market downturns can lead to impressive compound returns. Historically, the S&P 500 (^GSPC -0.62%) has delivered an average annual total return of around 10% since its inception in 1957, making it an attractive option for long-term investors. An easy way to benefit from this trend is by purchasing an S&P 500 ETF, reinvesting its dividends, and returning in the future.
Yet, the S&P 500's 1% yield may not be appealing to income-focused investors. Therefore, if you have $5,000 to allocate to a single dividend stock, Altria (MO +1.35%) could be a suitable option. Altria is the leading tobacco company in the U.S., owning Marlboro, the country's most popular cigarette brand, alongside other cigarettes, cigars, and smokeless products.
Although Altria's revenue primarily comes from cigarettes, the adult smoking rates in the U.S. have plummeted from over 40% in the 1960s to less than 10%, and its annual cigarette shipments have been declining for years. To counteract this trend, Altria raises cigarette prices, reduces costs, and repurchases its shares to improve cash flow and earnings per share (EPS), even though its revenue is only modestly growing.
Additionally, Altria is diversifying its product line by expanding its smokeless offerings, such as NJOY e-cigarettes and On nicotine pouches, to lessen its reliance on cigarettes. By 2028, Altria projects to generate at least $5 billion in smoke-free revenue, which would account for nearly a quarter of its projected sales. During the 2025-2028 period, analysts anticipate Altria's EPS to grow by a compound annual growth rate (CAGR) of 13%.
Despite its forward earnings multiple of 13 times, Altria offers a forward yield of 6%. Consequently, if you are searching for a straightforward method to generate $300 in annual income from a $5,000 investment, Altria tick all the right boxes.
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