Smoking rate has been in decline in the U.S. since the mid-1960s. The continued contraction is a result of high taxes, the ban on tobacco advertisements, and public awareness of smoking hazards. The smoking among adults has dropped from 24.7% in 1997 to 15.1% in 2015, but anti-smoking organizations and public health advocates are still asking for more taxes and forbidding regulations to put tobacco out of reach.
Source: CDC
The retail sales value growth of the U.S. tobacco industry has slowed significantly, but Altria Group (NYSE:MO) is making enormous profits. Thus, the stockholders have booked a total return of just over 41% in the past twelve months and outperformed tobacco sector as well as S&P 500 Index. Vigorous fundamentals still have the potential to boost future returns, but historically high valuation, a wave of new regulations and taxes can challenge Altria's performance.
