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Divided Stock Idea of the Week: Philip Morris International (PM)

Our weekly dividend idea is the global cigarettes and tobacco stock Philip Morris International (PM); the leading tobacco stock has 3.98% yield and 7.7% upside potential.

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Philip Morris International (PM) is a leading international tobacco company, encompassing eight of the world's top 15 international brands which includes Marlboro, the number one cigarette brand worldwide. PM has become the world's leading international tobacco company and the third most profitable international consumer goods company. While US sales revenues have been in decline as its parent company, Altria Group, struggles to cope with higher state tobacco tariffs and the tobacco industry's negative image in the US, international sales continue to grow for PM.

Philip Morris International's subsidiaries and affiliates and their licensees are engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the US. Its products are sold in approximately 180 countries. The company divides its markets into four geographic segments: The European Union (EU) region, the Eastern Europe, Middle East and Africa (EEMA) region, the Asia region and the Latin America and Canada region.

Philip Morris International is a buy for all dividend growth investors. The company increased dividends over a period of five consecutive years with a double-digit rate. Dividends grew faster than the earnings per share due to the fact that the company stock up its payout ratio to a current value of 63%. After the spin-off from Altria, the company was nearly debt-free and raised its loans to banks and other creditors to a current value of $22.4 billion. In relation to the strong operating cash flow, measured by an EBITDA of $14.58 billion, the leverage seems to be ok for a consumer goods company with a high degree of addictiveness. The valuations are not cheap especially if you look at the disappointing third quarter figures, the slowing growth of Europe and the reinforcing legal restrictions.

On Sept. 12, 2012 PM increased its dividend by 10.4% to $0.85 quarter dividend or $3.40 full year dividend. Analysts from Morningstar estimated the fair value of the company at $92 which include a current upside potential of 7.70%. Philip Morris International is also a bet on China. Nearly half of Philip Morris International's sales were generated in Asia, the strongest growth region in the world.

Here is a snapshot of Philip Morris International:

Philip Morris International (PM) has a market capitalization of $142.7 billion. The company employs 78,100 people, generates revenue of $76.4 billion and has a net income of $8.9 billion. The firm's earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $14.3 billon. The EBITDA margin is 18.76 percent (the operating margin is 17.46 percent and the net profit margin is 11.63 percent).

Financial Analysis: The total debt represents 52.26 percent of the company's assets and the total debt in relation to the equity amounts to 8,098.25 percent. Due to the financial situation, a return on equity of 457.4 percent was realized. Twelve trailing months earnings per share reached a value of $5. Last fiscal year, the company paid $2.82 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 17.07, the P/S ratio is 1.87 and the P/B ratio is 643.79. The dividend yield amounts to 3.98 percent and the beta ratio has a value of 0.86.

These are the main big competitors at the stock market:

British American Tobacco (BTI) has a market capitalization of $98.53 billion. The company generates revenue of $24.473 billion and has a net income of $5.363 billion. The firm's EBITDA amounts to $8.3 billion. The EBITDA margin is 34.02 percent (the operating margin is 30.48% and the net profit margin is 21.92%).

The total debt represents 37.89 percent of the company's assets and the total debt in relation to the equity amounts to 125.82 percent. Last fiscal year, a return on equity of 35.63 percent was realized. Twelve trailing months earnings per share reached a value of $5.10. Last fiscal year, the company paid $4.02 in the form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 19.95, the P/S ratio is 4.04 and the P/B ratio is 7.71. The dividend yield is 4.15 percent. The beta ratio is 0.60.

Altria Group (MO) has a market capitalization of $63.75 billion. The company generates revenue of $23.8 billion and has a net income of $3.4 billion. The firm's EBITDA amounts to $6.3 billion. The EBITDA margin is 26.56 percent (the operating margin is 25.5 percent and the net profit margin is 14.26 percent).

The total debt represents 37.04 percent of the company's assets and the total debt in relation to the equity amounts to 371.98 percent. Last fiscal year, a return on equity of 76.13 percent was realized. Twelve trailing months earnings per share reached a value of $1.92. Last fiscal year, the company paid $1.58 in the form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 16.4, the P/S is 2.68 and the P/B ratio is 17.49. The dividend yield is 5.59 percent. The beta ratio is 0.41.

Imperial Tobacco (ITYBY) has a market capitalization of $38.09 billion. The company generates revenue of $45.4 billion and has a net income of $1.1 billion. The firm's EBITDA amounts to $5.2 billion. The EBITDA margin is 11.48 percent (the operating margin is 5.31 percent and the net profit margin is 2.45 percent).

The total debt represents 34.69 percent of the company's assets and the total debt in relation to the equity amounts to 158.86 percent. Last fiscal year, a return on equity of 9.91 percent was realized. Twelve trailing months earnings per share reached a value of $2.15. Last fiscal year, the company paid $3.36 in the form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 35.8, the P/S ratio is 0.85 and the P/B ratio is 4.06. The dividend yield is 4.03 percent. The beta ratio is 0.74.

Reynolds American (RAI) has a market capitalization of $23.13 billion. The company generates revenue of $8.5 billion and has a net income of $1.4 billion. The firm's EBITDA amounts to $2.5 billion. The EBITDA margin is 29.7 percent (the operating margin is 28.09 percent and the net profit margin is 16.46 percent).

The total debt represents 22.54 percent of the company's assets and the total debt in relation to the equity amounts to 58.60 percent. Last fiscal year, a return on equity of 22.04 percent was realized. Twelve trailing months earnings per share reached a value of $2.64. Last fiscal year, the company paid $2.15 in the form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 15.67, P/S ratio is 2.71 and the P/B ratio 3.81. The dividend yield is 5.7 percent. The beta ratio is 0.58.

Lorillard (LO) has a market capitalization of $14.57 billion. The company generates revenue of $6.5 billion and has a net income of $1.1 billion. The firm's EBITDA amounts to $1.9 billion. The EBITDA margin is 29.83 percent (the operating margin is 29.26 percent and the net profit margin 17.26 percent).

Twelve trailing months earnings per share reached a value of $8.35. Last fiscal year, the company paid $5.20 in the form of dividends to shareholders.

These are the price ratios of the company: The P/E ratio is 13.48 and the P/S ratio is 2.25. The dividend yield is 5.51 percent. The beta ratio is 0.43.

Vector Group (VGR) has a market capitalization of $1.41 billion. The company generates revenue of $1.1 billion and has a net income of $75.02 million. The firm's EBITDA amounts to $152.71 million. The EBITDA margin is 13.47 percent (the operating margin is 12.54 percent and the net profit margin is 6.62 percent).

The total debt represents 58.66 percent of the company's assets. Twelve trailing months earnings per share reached a value of $0.25. Last fiscal year, the company paid $1.47 in the form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 63.95 and the P/S ratio is 1.24. The dividend yield is 9.44 percent. The beta ratio is 0.43.

Here is the full free PDF-Report of Philip Morris, also for download available.

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* I am long in PM shares. I receive no compensation to write about these specific stocks, sector or theme. I don't plan to increase or decrease positions or obligations within the next 72 hours.

For the other stocks, I have positions in MO, LO, BTI an no positions in other stocks mentioned, and no plans to initiate any positions within the next 72 hours. I receive no compensation to write about any specific stock, sector or theme.

The stock analysis, including the rating and up/down potential, is based on historical information and provided by several data provider like Thompson Reuters, Morningstar, Google Finance, Yahoo Finance and MSN. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Material presented here is for informational purposes only. Before buying or selling a security, you should do your own research and reach your own conclusion.

About the author:

Dividend
I am a private full time investor searching for investments and investment ideas.

Visit Dividend's Website


Rating: 4.0/5 (5 votes)

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