After the recent stock split announcement from Coca-Cola (KO) and Google (GOOG) it suddenly looks like big companies are in favor of stock splits. Agreed, Google's is not exactly a classic stock split but at the end of the day investors would still have double the number of Google shares at about half the price irrespective of voting rights.
These two splits got us thinking about one of the core holdings in our portfolio, Philip Morris International (PM). As most investors know Philip Morris was spun off from Altria Group (MO) in 2008 and has grown into one of the most popular stocks and rightly so, given its dividends and growth potential. In spite of the spin off, there is no denying that Altria's genes are very much intact at Philip Morris International:
- PM, like Altria has increased its dividends generously each year since the spin off in 2008.
- PM, like Altria buys back its shares regularly.
- PM, like Altria is on the look out for acquisitions to enhance its market share.
So, what's to say PM will not follow its parent Altria in stock splits as well ? As the table below shows, Altria (as the old Philip Morris) split each time a few months after the stock price went above $100 and once even before hitting $100. And of course this resulted in higher overall returns to the investors, backed up by increasing dividends and steady earnings.
Philip Morris has been on a tear lately along with the rest of the market and the stock reached a new 52 week high of $90.63 on Friday, April 27th 2012. When one considers the fact that PM is currently trading at a lower multiple than Altria, which doesn't have the same growth potential Philip Morris international has, we should not be surprised to see PM catching up to its latest earnings per share. That and the overall bullish sentiment in the market should propel PM to $100 very soon.
Conclusion: Unless there is an entire market crash, Philip Morris is well on its way to $100/share and beyond in 2012. And given PM's history of closely following Altria's footsteps, investors can look forward to a stock split by the end of the year. While we stick by the point made in the Coke article that split alone is not a good enough reason to buy stocks, Philip Morris certainly has other positive attributes that would make the split an icing on the cake.