This tobacco company is making waves, with its’ ‘heat-not-burn’ tobacco platform. The shares have an annual dividend yield of 6.08%, paid quarterly.
Philip Morris International (PM)
From Contrarian Outlook
If a weak dollar props up U.S. multinationals, you have to love an American-headquartered company that reports its results in U.S. dollars but doesn’t generate a cent of revenue domestically.
NYC-based Philip Morris International, which was spun off from Altria Group (MO) in 2008, sells cigarettes and other products in more than 180 international markets, where it often holds either the No. 1 or No. 2 position. It boasts six of the top 15 international brands, including longtime leader Marlboro.
It has also invested heavily in heated tobacco, which is yet another cigarette alternative that’s picking up speed. Its IQOS brand boasted 15.4 million users as of the end of the second quarter, up from 14.6 million in Q1, its pace of growth slowed by COVID-19, but not squashed.
While Philip Morris is fighting many of the same anti-tobacco trends here in the U.S., it has been slowly but surely able to grow revenue for several years without interruption. While 2020 should end that streak, it still appears far better-positioned than its American counterparts.
No yield concerns here, either. PM shares are at the high end of what you can expect from traditional blue chips. Its dividend growth rate of 3.2% annually, while modest, outstrips current-day inflation; we’ll see if the Fed’s printing press changes that.
Just be realistic. Tobacco, at best, will provide merely glacial growth. The yield will be most of your returns, so ask yourself: Is 6%+ enough?
Brett Owens, Contrarian Outlook, BNK Invest Inc., 500 North Broadway, Suite 265, Jericho, NY 11753 USA, 516-620-4294, July 31, 2020