Want Income for Life? Philip Morris International Yields 3.2% and Has the Kind of Competitive Moat That Makes the Income Durable.
A strong legacy business and bright future combine to make Philip Morris a no-brainer for dividend investors.
Seeking a reliable source of income for the duration of one’s life? A stock with an attractive dividend yield and a track record of consistent annual increases could be an appealing option. Philip Morris International (PM) provides precisely that, currently yielding 3.2%. Notably, PM has been raising its dividend annually since its initial trading in 2008, with the most recent increase being an 8.8% boost. This dividend has been a consistent performer, and evidence suggests it will continue to grow over time.
At first glance, the prospect of investing in a tobacco company may seem perplexing. After all, smoking rates have been on a decline in the United States for decades. However, Philip Morris primarily focuses on international markets, primarily selling Marlboro cigarettes. The phenomenon of declining smoking rates is not as straightforward abroad, where population growth has contributed to an increase in the number of smokers despite the overall smoking rate decreasing.
PM’s international business is buoyed by a pricing advantage, enabling the company to increase its organic gross profit from combustibles by 7.4%. In addition, PM has been actively diversifying its business to include reduced-risk products, which now make up 42% of its net revenue through the first nine months of 2026. These include oral nicotine salt pouches, electronic vapes, and heat-not-burn tobacco devices.
By shifting its focus towards these alternative products, PM is positioning itself for success in the evolving tobacco industry.
With both core segments of its business thriving, analysts predict earnings growth averaging nearly 9% annually over the next three to five years. This growth, coupled with a relatively low cash payout ratio of 67%, provides PM with financial flexibility and a buffer against potential challenges. Furthermore, PM has been investing in expanding its manufacturing capacity and acquiring other businesses, such as Swedish Match, while maintaining strong free cash flow.
The combination of a generous dividend yield, near-double-digit earnings growth, and a solid business outlook make Philip Morris International an attractive investment option for those seeking a reliable source of income for life.
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