Philip Morris International Inc. (PM) has over the last couple of years implemented very shareholder friendly policies. The company has been engaged in a massive share buyback program and has been increasing its dividend yearly since its spin off from Altria (MO) back in March 28, 2008. The company has also increased its earnings at a steady pace while also taking advantage of historically low interest rates to lower its interest expense. PM has been firing on all cylinders since its spin off, it is a classic example of a high quality dividend stock with strong earnings growth. For these reasons, PM is one of my largest holdings.
Philip Morris is currently trading for $88.72 as of Nov. 23, 2012.. With its current quarterly dividend of $0.85, the yield equates to $3.40 per year, or 3.8%.
Philip Morris International has been growing its dividend at an average pace of over 13% since its spin off from in 2008. Its 2008 yearly dividend was $1.84 compared to today's dividend of $3.40, this is equal to an 84.8% increase in the dividend in only 5 years.
Philip Morris International has also been engaged in an aggressive share buyback program since 2008. The company has bought back nearly $26 billion (466.6 million shares at an average price of $55.75) to date. This is about 22% of the total shares outstanding since it was spun off.
YTD FINANCIAL OVERVIEW
Philip Morris International has been increasing its earnings at a constant rate if you exclude the impact of currencies. For 3Q 2012 the company reported $1.32 in eps, down 2.2% versus the $1.35 reported 3Q 2011. Excluding currency, reported eps came in at $1.39, up 3.0%. For period prior to 2012 eps growth has averaged over 15% per year excluding currencies. YTD adjusted EPS ex currency is up 10.9 compared to prior year. The company has projected a mid to long term currency neutral eps growth rate of between 10% to 12%. YTD net revenues are up 5.4% excluding currency compared to prior year . YTD adjusted OCI excluding currency and acquisitions is up 6.9% compared to prior year. YTD Organic cigarette volume is up 0.7% compared to prior year.
DIVIDEND PAYOUT RATIO
Philip Morris International has averaged a 62% dividend payout ratio during the last 8 quarters. During Q3 2012 the payout ratio was 61% compared to the 57% payout ratio during Q3 2011.
PEG DISCOUNT COMPARED TO PEERS
Using a basket of other mega-cap consumer peers, Philip Morris's PEG has traded at a discount since its spin off in 2008.
LONG TERM DEBT
Philip Morris International has done a fantastic job shoring up its balance sheet since its spin off in 2008. The average coupon yield for its long term debt has fallen 24% from 5.5% in 2008 to an estimated 4.2% in 2012. The average time to maturity for its long term debt has increased 3 years from 7.1 years in 2008 to 10.2 years in 2012.
For those looking for a high current yield and dividend growth Philip Morris International is a great choice. Its management has used its expertise to significantly reduce the yield on its outstanding debt but also buy back an incredibly large amount of outstanding shares. With a current yield of 3.8% and an average dividend growth well over 10% Philip Morris International is well worth a look.