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When it comes to Altria (NYSE: MO), the big attraction for most investors is going to be its huge 8.9% dividend yield. But yields usually don't get that high without a good reason, which is why most long-term dividend investors should probably consider Philip Morris International (NYSE: PM) instead, despite a lower yield. Here's what you need to know to make the call.

The similarities and differences between Altria and Philip Morris International

In early 2008 Altria spun off Philip Morris International. In effect, Altria retained the rights to sell Philip Morris brands in the United States while Philip Morris International sold those same brands outside the United States. In this way, the two companies share the same iconic cigarette brand portfolio, which includes industry giant Marlboro.

According to Altria: "Altria's Board of Directors and management believed that the spin-off would enable each of Altria's international and domestic tobacco businesses to focus exclusively on realizing its own opportunities and addressing its own challenges, thereby building long-term shareholder value."

The big-picture problem is the global shift away from cigarette smoking. Both are working to find new nicotine-based products to offset the decline in their core cigarette operations. However, with Altria focused on just one market, the risk involved is more binary. Philip Morris International benefits from the diversification of having different markets in its portfolio. Altria's ultra-high dividend yield is, at least in part, a sign of this increased risk.

Altria has stumbled

That said, Altria was an early investor in vape maker Juul and marijuana company Cronos. At the time of investment both made logical sense, as they could help the company broaden beyond cigarettes. However, neither one turned out to be successful, with the pair leading to massive writedowns and one-time charges.

Altria is trying again with vapes, having recently acquired Njoy. While it is still early, Njoy was at a later stage of business development when acquired and the deal probably has a higher likelihood of turning out successful. But it's hard to ignore the bad track record Altria has with regard to big corporate moves.

That includes spinning off Philip Morris International. Although the two don't compete with regard to cigarettes, Philip Morris International is increasingly a competitor in non-cigarette arenas in the United States. So Altria basically created a competitor when it spun off Philip Morris International. Altria's series of poor strategic decisions is another reason the stock's dividend yield is so high.

Philip Morris International is succeeding where Altria didn't

In an industry that's going through a major transition, Philip Morris International has simply executed better. In the company's 2023 annual report, it provided an update on its success: "In 2023, our smoke-free portfolio accounted for 36.5% of total net revenues, with 25 markets generating more than 50% of their total net revenues from smoke-free products. As of year-end, our smoke-free products had approximately 33 million users and were available in 84 markets."

While Philip Morris International's dividend yield is lower, at 5.4%, the company's business shift is clearly going relatively well compared with Altria's efforts. Investors are rewarding the company for its success, noting that more than a third of the top line is not cigarette-related.

Raising prices isn't a long-term plan

Altria has supported its dividend by enacting price increases. That has worked well so far to offset the ongoing declines in the company's cigarette business, and it will probably continue to work for at least a little longer. But at some point, Altria's price increases will probably start to exacerbate the pain it's feeling in cigarette sales. And with the poor track record management has achieved in finding alternatives, this is not a "set it and forget it" dividend investment. The high yield comes along with high risk.

Most long-term dividend investors would be better off accepting a lower yield from Philip Morris International. Doing so will still provide you a still material income stream, but that income will come from a similar company that has been executing at a much higher level.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.