Why Philip Morris nternational is a Solid Dividend Stock for the Next 20 Years

Philip Morris International

If you’re considering expanding your investment portfolio, or if you’re in the process of building a strong retirement investment plan, it’s a good idea to include some solid dividend stocks. While investing in the stock market always represents some degree of risk there are some stocks which are a better bet than others. The benefits of a dividend stock, regardless of what stage of investing and life you’re in are that the annual payouts can be reinvested to increase your retirement earnings. We’ve recently learned that Philip Morris International is a solid stock that shows the signs of being an excellent choice for building any kind of investment portfolio. Here are the reasons why you should consider buying shares in this company.

An overview of Philip Morris International

Philip Morris International stock is listed under the ticker symbol PMI on the New York Stock Exchange. The company is American in its origin with multinational affiliations. The primary source of its revenue comes from the manufacture of tobacco and cigarettes. The company is best known for the production of the Marlboro brand of cigarettes with sales in more than 180 countries throughout the world. The company was founded in 1847 and had operated under a parent company named Altria, up until 2008, when Philip Morris spun off to pursue greater business opportunities outside of US corporate ownership due to the restrictions which were beginning to emerge as a result of campaigns against smoking and the potential health risks it poses. PMI was forced to pursue the right to spin off from Altria through the court system. They were successful in establishing their current status as a United States based company that is a global business, operating outside of the US with the exception of its subsidiary Philip Morris USA.

What makes Philip Morris International a solid dividend stock?

When looking at the history of dividend stock investors, the tobacco industry has consistently been a more reliable source for producing high yields on investments as well as stock that produces growth within their payouts. This is always good news for investors even if there is an occasional dip or sluggish period. Philip Morris International has served as a good example of how a dividend stock can strengthen a retirement portfolio. Although investors have had some concerns with the future of the company, given challenges with the acceleration of regulatory efforts on tobacco throughout the globe, it’s caused some sluggishness in dividend growth, but so far, these challenges have not been catastrophic for investors.

Analysts have gone back and forth on their predictions for the growth of dividends for stocks in the tobacco industry, and although some have predicted that 2019 will, in fact, be a sluggish year for PMI, we must look at the history. PMI has maintained 11 consecutive years with increases in its dividend increases with a payout ratio of 106 percent and a dividend yield of 6.8 percent. The quarterly dividend per share was $1.14 as of the closing quarter of 2018, which represents a 7 percent increase. This shows a rebound after 2015 through 2016 2 to 5 percent. The Motley Fool analysts conclude that 2019 will be a sluggish year. The Fool’s analyst drew conclusions based upon entry into the emerging Japanese market with IOS sizable sales growth with high revenue gains which offset the weakening volume of cigarette sales, but when the IQOS in Japan slowed, it raised a few concerns because Philip Morris International continued to boost dividend payouts even with a slowdown in revenues. The strategy of the company to replace traditional cigarettes with their IQOS platform is the source of concern over how well the plan will work.

Why Philip Morris International’s plan is solid

Philip Morris International’s dividend payouts which exceed revenue growth consumes approximately six percent of the earnings of the company each quarter and while this could become a legitimate concern if the issue continues to be the case, it isn’t currently a problem. The business has a solid cash flow to maintain its progressive increases in dividend payouts which shows that they value their shareholders and have made a commitment to taking care of their interests, creating greater confidence for investors. As of May of 2019, PMI showed a 5 percent yield. They are a leading tobacco company which sells one of the world’s most popular cigarette brands along with 15 other brands considered to be the top sellers globally. It is currently branching out with new product strategies to address the public outcry for a cessation of tobacco use through tobacco alternatives, which opens up a new target audience in addition to the existing tobacco users.

Future outlook

The outlook for 2019 for Philip Morris International is a generation of about $9.5 billion for their operating cash flow and the expected capital expenses of $1.1 billion, leaving them with ample funds for continued increases which will maintain a continuum of dividend payout growth. The company anticipates a continuation of this trend through 2024 with expected annual returns of at least ten percent during this period. The projected growth of the company is likely to continue due to the reduced risk products currently being offered and some analysts even venture that the revenues could double over the next decade, making this one of the better choices for investment in high yield dividend stocks for 2019, as well as the fact that it’s offered at a good entry price even for first time investors.

Final thoughts

Few publicly traded companies are without their areas of concern but it appears that Philip Morris International has maintained an excellent track record of taking care of their shareholders while attending to the challenges faced within all companies in the tobacco industry. They’re at this time a solid company and their prospectus for a steady growth outlook are key factors in making this a stock we’d place as being high on the list of those to consider.

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