Understanding the Sustainability and Future Prospects of Philip Morris International Inc's Dividend
Philip Morris International Inc (PM, Financial) recently announced a dividend of $1.3 per share, payable on 2023-10-12, with the ex-dividend date set for 2023-09-26. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Philip Morris International Inc's dividend performance and assess its sustainability.
What Does Philip Morris International Inc Do?
Philip Morris International is an international tobacco company with a product portfolio primarily consisting of cigarettes and reduced-risk products, including heat-not-burn, vapor and oral nicotine products, which are sold in markets outside the United States. The company diversified away from cigarettes with the 2022 acquisition of Swedish Match, a leading manufacturer of traditional oral tobacco products, primarily in the U.S. and Scandinavia. It diversified away from nicotine products with the acquisition of Vectura, a provider of innovative inhaled drug delivery solutions, in 2021. The firm has six geographical segments: the European Union; Eastern Europe; Middle East and Africa; South and Southeast Asia; East Asia and Australia; and Americas.
A Glimpse at Philip Morris International Inc's Dividend History
Philip Morris International Inc has maintained a consistent dividend payment record since 2008. Dividends are currently distributed on a quarterly basis. Philip Morris International Inc has increased its dividend each year since 2008. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 15 years.
Breaking Down Philip Morris International Inc's Dividend Yield and Growth
As of today, Philip Morris International Inc currently has a 12-month trailing dividend yield of 5.41% and a 12-month forward dividend yield of 5.55%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Philip Morris International Inc's annual dividend growth rate was 2.90%. Extended to a five-year horizon, this rate increased to 3.40% per year. And over the past decade, Philip Morris International Inc's annual dividends per share growth rate stands at 4.10%.
Based on Philip Morris International Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Philip Morris International Inc stock as of today is approximately 6.39%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Philip Morris International Inc's dividend payout ratio is 0.98, suggesting that the company's dividend may not be sustainable.
Philip Morris International Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Philip Morris International Inc's profitability 8 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Philip Morris International Inc's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Philip Morris International Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Philip Morris International Inc's revenue has increased by approximately 2.20% per year on average, a rate that underperforms than approximately 76.19% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Philip Morris International Inc's earnings increased by approximately 8.00% per year on average, a rate that underperforms than approximately 47.5% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 7.50%, underperforms than approximately 45.16% of global competitors.
Next Steps
Given the comprehensive analysis of Philip Morris International Inc's dividend payments, dividend growth rate, payout ratio, profitability, and growth metrics, it's clear that the company has a strong history of consistent dividends. However, the high payout ratio coupled with underperformance in growth metrics relative to global competitors raises questions about the sustainability of its dividends in the long run. Investors should therefore consider these factors carefully while making investment decisions. Remember, a strong dividend history does not guarantee future performance. Always conduct thorough research and consider the company's overall financial health before investing.
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