Philip Morris
International is a spin off from Altria.
It manufactures, sells and distributes a wide range of tobacco products
in markets outside the US including Marlboro, Philip Morris, Chesterfield,
Parliament and L&M. Operating
profits from this segment of the old Altria business grew at a 9% annual rate
over the last five years while dividends have grown at a much more rapid pace. PM expects earnings and dividends to grow at
a 6-8% rate in the future based on:
(1) strengthening its brand
through product innovations such as smoother taste, new tobacco blends as well
as a move into e-cigarettes,
(2) growing strength in the Asian
markets,
(3) strong cash flows allow for an ongoing major
stock buyback program,
(4) ability to increase prices,
(5) focus on reducing costs.
Negatives:
(1) counterfeiting of branded
cigarettes,
(2) highly competitive industry,
(3) it is subject to government
regulations worldwide.
PM is rated B++ by Value Line,
has a higher than we would like debt to equity ratio of about 124%, and its stock
yields 4.4%.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2008
PM 4.4% 6% 75% 6*
Ind Ave 4.4 8 62 NA
Debt/ EPS
Down Net Value Line
Equity ROE Since 2008 Margin Rating
PM 124% 167% 2* 10% B++
Ind Ave 63 56 NA 14 NA
*the company has only reported separately for six years
Chart
Note:
PM stock made great progress off its March 2009 low, quickly surpassing the
downtrend off its September 2008 high (straight red line) and the November 2008
trading high (green line) but flattening out in mid-2013. Long term, it is in a trading range (blue
lines). Intermediate term, it is in a
trading range (purple line is lower boundary).
The wiggly red line is the 50 day moving average. The Dividend Growth and High Yield Portfolios
own 90% positions in PM. The upper
boundary of its Buy Value Range is $60; the lower boundary of its Sell Half
Range is $105.
10/14
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