Since the beginning of the year, tobacco giant Altria Group Inc. (NYSE: MO) saw its stock price dive from just over $50 a share to near $30. A tobacco products company that pays a dividend yield of 8.7% and dumps 40% of its share price remains too good to pass up. As of April 14, the shares traded shy of $42, cutting the year-to-date loss by more than half.

To slow the spread of COVID-19, Altria suspended operations at its Richmond manufacturing center for two weeks beginning March 20. The company has not announced whether operations have resumed. Altria paid employees their regular base wages during the shutdown.

Altria’s board chair and CEO, Howard Willard, tested positive for the coronavirus and took a medical leave after contracting COVID-19. There has been no announcement of his return.

At the time of those announcements, Altria also said it had enough cigarette inventory to meet estimated shipping volume for two months. The company also had three months worth of cigar volume on hand.

Not to downplay the impact of COVID-19 on either the company’s employees or its CEO, the economic impact has likely been marginal and no threat at all to Altria’s annual dividend yield of 8.73%.

Old Bad News About Altria’s Investment Strategy

With traditional tobacco products selling less, Altria and its sister company, Philip Morris International Inc. (NYSE: PM), have begun marketing a “heat-not-burn” device dubbed IQOS that, unlike e-cigarettes, doesn’t burn anything.

Altria invested $12.8 billion in e-cigarette maker Juul in late 2018, largely as a means to get an e-cigarette to market as quickly as possible. In the past two quarters, it has written down $8.6 billion on the investment, following an outbreak of serious lung disease that surfaced last summer.

The U.S. Food and Drug Administration (FDA) approved the IQOS device in the United States in April of 2019. The FDA’s position on non-burning tobacco products is that they are generally safer than cigarettes. The agency continues to say that about e-cigarettes.

Even IQOS and similar heat-not-burn devices have critics, however. Stanton Glantz, director of the University of California San Francisco Center for Tobacco Control Research and Education, told Drugwatch, “IQOS is not detectably different from a conventional cigarette. … I don’t see how the FDA approved it. If it’s indistinguishable from a cigarette in terms of health effects, what do you gain by letting it on the market?”

Altria also showered pot grower Cronos Group Inc. (NASDAQ: CRON) with $1.8 billion in late 2018, just before the Canadian pot industry dumped about half its value.

Altria’s New Bad News

On April 2, the U.S. Federal Trade Commission (FTC) filed an administrative complaint alleging that Altria and Juul Labs violated federal antitrust laws with the 2018 investment. According to the FTC, Altria and Juul had been competitors until Altria axed its MarkTen brand e-cigarettes and made its investment in Juul. FTC director of the competition bureau, Ian Conner, “Altria and Juul turned from competitors to collaborators by eliminating competition and sharing in Juul’s profits.”

Under the terms of the 2018 agreement, Altria said it would not compete with Juul for six years. That agreement was revised in the fourth quarter of 2019 after Altria had written down billions of its original investment.

Other revisions to the original agreement include an option that Altria may elect to be released from its noncompete obligation on two conditions. First is if federal law prohibits the sale of vape products for at least a year, and the other is if Altria’s carrying value on its $12.8 billion investment does not retain more than 10% of its original value.

The first hearing in the FTC suit is scheduled for January 2021. In a press release, Altria said the company was “disappointed with the FTC’s decision [and believes it has] a strong defense and will vigorously defend our investment.”

Altria could argue that it was hedging its bet on IQOS by making an investment in Juul. If IQOS turned out to be a hit, the Juul investment could have been sold or written off. If IQOS was a loser, then at least Altria had an e-cigarette to fall back on.

What’s at Stake for Altria Shareholders

The Juul agreement has tanked. The Cronos investment may still have some life in it, but that’s increasingly doubtful. IQOS may be a hit or it may be a flop, but it’s really the company’s only hope for meaningfully increasing revenue.

Sure, the company can raise cigarette prices, but there will come a point when price hikes won’t change the story either. It may be IQOS or nothing for Altria and Philip Morris, but the blowback on the safety of the devices is already mounting.

In May of last year, Philip Morris used a 21-year old Russian social media influencer to market the IQOS device. According to an exclusive report from Reuters, that marketing program violated the company’s own standards. Philip Morris was prohibited from promoting tobacco products by using celebrity endorsements from people who appeal to the young or who “are or appear to be under the age of 25.”

The FDA may yell and scream at Altria and Philip Morris for their IQOS device and marketing tactics. Given the agency’s current preference (and blessing) for anything other than a burning cigarette though, the two companies will continue to push e-cigarettes and IQOS toward young people, most of whom are nonsmokers.

Altria’s war chest is so large that it can drag this fight out for years, maybe decades. Investors don’t even have to worry about the dividend. That stock is not included in the consumer staples sector for no reason.

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