
Why Philip Morris' Strong Dividend Yield Is Worth the Wait
Investors who are looking for a company that pays a strong dividend yield among the consumer staples sector with potential for long-term gains should consider Philip Morris International (PM) - Get Report , whose shares will trade ex-dividend Tuesday, March 22. That's the last day management of the company will finalize its roster of shareholders to whom it will mail cash payments.
Despite missing Wall Street's fiscal fourth-quarter revenue forecast last month, sending its shares down more than 3%, there are tons of reason to be optimistic about the New York-based company's growth potential. One reason is its steady cash flow, which has fueled its dividend increases during the past decade.
At around $98 per share, Philip Morris stock has increased some 12% so far on the year, while climbing 27% in the past 12 months, compared to a 1% year-to-date decline in the S&P 500 (SPX) index. The reason for the company's gains? It would seem investors are betting on Philip Morris' future. The company, which is projected to earn $4.76 per share in fiscal 2017, will return to earnings growth much sooner than expected. Per-share earnings of $4.76 would mark an 8% rise above fiscal 2016 estimates of $4.39 per share.
What's more, despite currency impacts of the strong dollar that devalues its overseas sales, Philip Morris' underlying financial results -- thanks to its strong pricing power that has boosted free cash flow -- remains strong. And its growing cash flow, which is around $8 billion in the last four quarters, has enabled the company to raise its dividend by some 60% in the past five years. And it's a solid dividend too.
With its shares trading at around $98.90, Philip Morris' $1.02-per share quarterly payout yields 4.23% annually, which is more than twice the 2.00% average yield paid out by companies in the S&P 500 index.
Philip Morris will make its quarterly dividend payment on Monday, April 11 to shareholders of record on Friday, March 25. This amounts to roughly 10 trading days between the record date and the payment date, making it a quick turnaround for investors who want to buy the company's stock just for the dividend.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stock mentioned.









