Sell This Dividend Blimp Right Now: Requiem For A Philip Morris

Jun.27.12 | About: Philip Morris (PM)

Dividend lovers love Philip Morris International (NYSE:PM). The company, based in New York and selling its wares exclusively overseas, has been managed near-flawlessly. Morris yields 3.67%. Its brands continue to rule the globe. It is buying back $18 billion worth of shares over the next 3 years. It's developing inventive smoking alternatives. It's all-world.

And it's finished. Philip Morris will watch as mentor Altria (NYSE:MO) and rival British American (NYSEAMEX:BTI) continue their legends as tobacco investment champions, but Morris is doomed to disappoint.

Altria is based in these United States of America, and sells domestically. British American is UK based and sells globally, including into the United States. Morris, on the other hand, is US based but does not sell in the US, Morris only sells globally. Morris pays its dividends in US dollars, buys its shares back in US dollars, pays its executives in US dollars, pays its taxes in US dollars, lobbies Washington with US dollars etc. It gets paid, however, in everything except US dollars. Have a look at this: (Source: Google Finance)

The company divides its markets into four geographic segments: The European Union (NYSEARCA:EU) Region, The Eastern Europe, Middle East & Africa (NASDAQ:EEMA) Region, The Asia Region, and The Latin America & Canada Region.

Which of those four regions' currencies are going to be stronger than the dollar going forward? Europe? Latin America? Asia?

If up until this point in the article you were skeptical maybe now you say "hmmm."

Check out this article by the good Doctor Craig Pirrong

Foreign central banks don't want to see a dramatic strengthening of their currencies relative to the dollar. They therefore respond to U.S. monetary expansion by expanding their own money supplies. In a fixed exchange rate world, inflation rates will be equal in all currencies, and a U.S. monetary expansion would lead to world inflation as to maintain the fixed rate foreigners have to expand their money supplies to match the U.S. expansion.

The United States may have problems, but not like the EU or struggling banana republics. The idea that the US dollar will somehow weaken relative to the world in the foreseeable future is unrealistic to me.

Add to that the fact that Morris trades at a premium to Altria, whose yield is 4.87%, and British American, whose yield is 4.06%. And PM has been on a tear:

Click to enlarge

Morris has run up BIG, so SELL IT RIGHT NOW. The US dollar will only get stronger than Morris's customers' currency. Morris competitors do not have this problem and offer a better dividend. Sell Morris. Sell it all right here. Sell Philip Morris.

While you are selling Morris have a look at some other non-cyclical consumer plays and remember to take into account in what currency they get paid and in what currency they are denominated: The Coca-Cola Company (NYSE:KO), Procter & Gamble Co. (NYSE:PG), Fomento Econ(NYSE:FMX),Philip Morris International, Inc. (NYSE:), Ambev (NYSE:ABV),Anheuser-Busch InBev SA/NV (NYSE:BUD),Pepsico, Inc. (NYSE:PEP),British American Tobacco plc (NYSEAMEX:),Unilever plc (NYSE:UL),Unilever NV (NYSE:UN),Altria Group Inc. (NYSE:),Kraft Foods Inc. (NYSE:KFT),Diageo plc (NYSE:DEO),Colgate-Palmolive Co. (NYSE:CL),Starbucks (NASDAQ:SBUX), Kimberly-Clark Corporation (NYSE:KMB), General Mills, Inc. (NYSE:GIS), Reynolds American Inc. (NYSE:RAI), Coca-Cola FEMSA S.A.B de C.V. (NYSE:KOF), Estee Lauder Companies Inc. (NYSE:EL), Ecolab Inc. (NYSE:ECL), Archer Daniels Midland Company (NYSE:ADM), Mead Johnson Nutrition Company (NYSE:MJN), Kellogg (NYSE:K), H.J. Heinz (NYSE:HNZ), Lorillard (NYSE:LO), Hershey (NYSE:HSY), Brasil Foods S.A. (NYSE:BRFS), Brown-Forman Corporation (NYSE:BF.B), Sara Lee (NYSE:SLE)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.