Tobacco stocks are going up in smoke

For some investors, sin stocks such as alcohol makers, casinos, and gun manufacturers are to be avoided at all costs. But one member of this sinful bunch is rising straight to the heavens.

Tobacco stocks are on a hot streak these days, thanks to a recent big break from the FDA. The regulator ruled in May that tobacco companies can put new vapes and oral nicotine pouches on store shelves before they’re fully approved—a reversal in once-stringent policies that provides these companies with more avenues for growth.

And grow they have: Philip Morris International is up 12.9% this year, while Altria Group has climbed 24.18%, putting both ahead of the S&P 500 in 2026.

Smoke break

Tobacco companies watched their sales go up in smoke in the ‘90s and early 2000s as regulations and health-conscious consumers ate into their revenue. But the pivot to smokeless products a few years back has breathed new life into the industry.

Nicotine pouches have been a particularly big hit: The New York Times reports that worldwide pouch sales are expected to rise from $6.9 billion last year to over $40 billion worldwide by 2033. While chewing tobacco has its fans (mainly old-timey baseball managers), younger users have turned to pouches in droves, prompting tobacco companies to explore other alternatives such as gum and lozenges. The FDA’s new ruling will only create more opportunities to come up with addictive new products.

That’s great news for Zyn parent company Philip Morris International, which made 41% of its sales from non-combustible products last year. About 20% of British American Tobacco’s revenue came from smokeless products last year, such as Vuse vapes and Velo pouches. And while Altria only got 12% of its revenue from oral tobacco and vape products last year, it plans to roll out more products under the Marlboro brand, which remains one of the most iconic brands in the market.

A potent combination

Smoking stocks have always been appealing to income investors, who love their strong dividends. The three largest tobacco companies by market cap are Philip Morris International, Altria Group, and British American Tobacco, which provide dividend yields of 3.08%, 4.37%, and 5.02%, respectively. The average dividend yield on the S&P 500 sits at just 1.05%.

Usually investors have to choose between income or growth, but in tobacco’s case, it now offers both. That could be a pretty addictive combination.—MR