Opportunity In Philip Morris International Inc. (PM)

Philip Morris International Inc. (PM) is one of my favorite dividend stocks. It manufactures and supplies an addictive product (cigarettes) with exceptional margins. It does business everywhere but the United States, which is where the domestic company Altria Group (MO) does business. This provides them with great exposure to emerging markets whose discretionary income is only set to rise over the next couple decades.

Recent weakness in PM shares may provide a long-term investor a nice opportunity. It is down 5.25% over the last trading week, and down 3.48% today. This appears to mostly be due to some analyst downgrades amid reduced EPS expectations. I think if you look out over the next 10-20 years, PM will be a strong performer. It currently yields 4.20%, and pays a quarterly dividend of $0.77 per share. The debt load is a little concerning, but the strong cash flow provides PM ample opportunity to keep debt in check while still continuing to raise the dividend.

Per Morningstar:

Philip Morris International is the world's second-largest tobacco company, behind only China National Tobacco, and holds almost 16% of the non-U.S. market. The firm owns seven of the leading 15 international brands, including Marlboro, the company's flagship brand that accounted for more than one third of total volume in 2010. Other key brands include L&M, Philip Morris, Bond Street, Chesterfield, Parliament, and Lark. 

I think the recent weakness in PM offers a long-term investor plenty of opportunity to initiate or add to an existing position. The current payout ratio is 65%, which is comfortable with the cash flow this company has. PM will likely continue to raise the dividend for years to come, after being split from MO in 2008. MO has a long history of raising its dividend, with a 43-year record of raising the dividend. The current P/E ratio for PM is 15.49 and has a debt/equity ratio of 6.0.

What about you? Buying PM on the dips?

Thanks for reading.

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