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Philip Morris Rewards Shareholders, Ups Dividend by 2.9%

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Philip Morris International Inc. (PM - Free Report) maintains its commitment to boost shareholders’ value through dividend payouts. Recently, management has approved a quarterly dividend hike of 2.9% to $1.07 per share from the previous payout of $1.04. The new dividend will be paid on Oct 12, to shareholders of record as on Sep 27, 2017, after the adjustment of ex-dividend date on Sep 26. This brings the company’s annualized dividend to $4.28 per share, representing an increase from the previous annualized rate of $4.16.

Notably, this was the 10th straight year of dividend hike by Philip Morris since it officially became a public company in 2008, reflecting a total growth of 132.6% or a compound annual growth rate of 9.8%. The last dividend hike of 2% to $1.04 per share was announced in September 2016.

Dividend hike is frequent among companies with a stable cash position and healthy cash flows. Therefore, we believe that such hikes not only enhance shareholders’ return but raise the market value of the stock as well. Basically, through these dividend increases companies persuade investors to either buy or hold the scrip instead of selling it.

Apart from Philip Morris, other consumer staple companies like Altria Group, Inc. (MO - Free Report) , Pinnacle Foods Inc. and The J. M. Smucker Company (SJM - Free Report) have also raised their dividends. Altria raised its quarterly dividend by 8.2% to 66 cents per share payable on Oct 10. Pinnacle Foods has approved a quarterly dividend hike of 14% to 32.50 cents per share that is payable on Oct 9. J. M. Smucker hiked its quarterly dividend by 4% to 78 cents per share, which was paid on Sep 1.

A Look at Philip Morris’ Performance

This tobacco leader has been witnessing declining shipment volumes mainly owing to declining demand for cigarettes because of ongoing anti-tobacco campaigns, and price rise to offset the effect of rising taxes. Moreover, consumers opting for e-cigarettes or reduced risk substitutes are denting cigarette volumes.

Despite declining cigarette volumes, Philip Morris continues to benefit from its strong portfolio of tobacco brands and pricing power. Further, the company is churning its portfolio and taking steps to develop smoke-free products called reduced risk products as customers are shifting away from tobacco products. In fact, Philip Morris remains focused on the growing e-cigarette category and less harmful alternative tobacco products such as HeatSticks and iQOS products and expects these products to drive growth in 2017.

Also, the company’s consistent returns to shareholders in the form of dividends remain noteworthy.



Shares of Philip Morris have gained 27.7% year to date, comfortably outperforming the industry’s growth of 9.7%. Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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