Philip Morris International (PM) - Get Report said Wednesday that the board increased the tobacco company's dividend 2.6% to an annualized $4.68 a share.

The new quarterly of $1.17 a share, up from $1.14, is payable Oct. 11 to holders of record Sept. 25.

In August, the New York company confirmed that it was in merger discussions with Altria Group (MO) - Get Report  regarding a potential all-stock deal as traditional tobacco smoking across the globe declines.

A merger would reunite Philip Morris International and Altria more than a decade after the two companies split.

Altria spun off Philip Morris in 2008 and has remained a largely U.S.-focused company, selling Marlboro cigarettes domestically, while Philip Morris has focused overseas. Both have dabbled in e-cigarettes and other non-combustible tobacco products as global tobacco sales have tapered off.

Altria's shares on Tuesday took a hit after the company was downgraded by Piper Jaffray analyst Michael Lavery amid concern its stake in Juul may not produce earnings that justify the current premium on its potential merger with Philip Morris.

Lavery said he cut Altria to neutral from overweight and lowered his price target on the stock to $49 from $64 amid less confidence on Altria's outlook. He said that any interest in a deal without a premium could suggest more stress on the underlying fundamentals and management's outlook.

Late last year, Altria invested $12.8 billion for a 35% stake in e-cigarette startup Juul Labs, whose marketing is reportedly under investigation by the Federal Trade Commission.

On Monday, the Food and Drug Administration issued a letter to Juul, warning the company that it was breaking the law by marketing its vaping products as less harmful than traditional tobacco products. Vaping has been associated with at least six deaths in the U.S.

Shares of Philip Morris were up 0.5% to $74.89, while Altria was up nearly 1% to $44.62 a share.