Philip Morris Int’l (PM): Bad Habit, Good Stock

“Investors should Philip Morris International to light up your returns and cash in on the growth of the global tobacco market,” says Gregory Dorsey.

In Leeb’s Performance Income Letter, he explains, “The stock, a new addition to our Growth & Income portfolio, is well positioned to provide solid results over the long haul.”

“Philip Morris International owns the international tobacco operations of its former parent company, Altria, which previously was known as Philip Morris.

“Spun off in early 2008, Philip Morris International owns seven of the world’s 15 leading cigarette brands, including marlboro cigarettes sale, Chesterfield and Parliament.

“All told, its brands give the company a 15% share of the total international cigarette market outside the U.S. It’s #1 or #2 in most of the 30 largest international markets.

“Cigarette smoking in the developed world has leveled off or is declining. Worldwide, however, tobacco consumption is on the rise, despite tighter regulations, higher taxes and the well-known ill health effects.

“Cigarettes are addictive: Smokers aren’t particularly price sensitive and will continue to buy their favorite brand even as the cost rises or they’re trying to cut back on expenses.

“So while many consumer companies have struggled during the economic turmoil, it’s been just a bump in the road for Philip Morris International.

“Strong cash-flow generation has enabled the company both to buy back shares and increase its dividend. The 7.4% payout boost last quarter brings the annual dividend to $2.32, giving the stock a 4.6% current yield.

“We expect future annual earnings growth on the order of 10%t. This should enable the company to keep raising the payout at a healthy pace. And the stock remains attractively priced, trading at about 13 times year-ahead expected profits.”


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